Labor Relation Set VI * CBA Cases* Page 1 of 63
SECOND DIVISION 2. The aggregate shares of stock transferred to PAL employees will allow them three (3) members to
[G.R. No. 135547. January 23, 2002]
GERARDO F. RIVERA, ALFRED A. RAMISO, AMBROCIO PALAD, DENNIS R. ARANAS, DAVID
SORIMA, JR., JORGE P. DELA ROSA, and ISAGANI ALDEA, petitioners, vs. HON.
EDGARDO ESPIRITU in his capacity as Chairman of the PAL Inter-Agency Task
Force created under Administrative Order No. 16; HON. BIENVENIDO LAGUESMA in
his capacity as Secretary of Labor and Employment; PHILIPPINE AIRLINES (PAL),
LUCIO TAN, HENRY SO UY, ANTONIO V. OCAMPO, MANOLO E. AQUINO, JAIME J.
BAUTISTA, and ALEXANDER O. BARRIENTOS,respondents.
DECISION
QUISUMBING, J.:
In this special civil action for certiorari and prohibition, petitioners charge public respondents
with grave abuse of discretion amounting to lack or excess of jurisdiction for acts taken in regard to
the enforcement of the agreement dated September 27, 1998, between Philippine Airlines (PAL) and
its union, the PAL Employees Association (PALEA).
The factual antecedents of this case are as follows:
On June 5, 1998, PAL pilots affiliated with the Airline Pilots Association of the Philippines (ALPAP)
went on a three-week strike, causing serious losses to the financially beleaguered flag carrier. As a
result, PALs financial situation went from bad to worse. Faced with bankruptcy, PAL adopted a
rehabilitation plan and downsized its labor force by more than one-third.
On July 22, 1998, PALEA went on strike to protest the retrenchment measures adopted by the
airline, which affected 1,899 union members. The strike ended four days later, when PAL and PALEA
agreed to a more systematic reduction in PALs work force and the payment of separation benefits to
all retrenched employees.
On August 28, 1998, then President Joseph E. Estrada issued Administrative Order No. 16
creating an Inter-Agency Task Force (Task Force) to address the problems of the ailing flag
carrier. The Task Force was composed of the Departments of Finance, Labor and Employment,
Foreign Affairs, Transportation and Communication, and Tourism, together with the Securities and
Exchange Commission (SEC). Public respondent Edgardo Espiritu, then the Secretary of Finance, was
designated chairman of the Task Force. It was empowered to summon all parties concerned for
conciliation, mediation (for) the purpose of arriving at a total and complete solution of the
problem.[1] Conciliation meetings were then held between PAL management and the three unions
representing the airlines employees,[2] with the Task Force as mediator.
On September 4, 1998, PAL management submitted to the Task Force an offer by private
respondent Lucio Tan, Chairman and Chief Executive Officer of PAL, of a plan to transfer shares of
stock to its employees. The pertinent portion of said plan reads:
1. From the issued shares of stock within the group of Mr. Lucio Tans holdings, the ownership of
60,000 fully paid shares of stock of Philippine Airlines with a par value of PHP5.00/share will be
transferred in favor of each employee of Philippine Airlines in the active payroll as of September 15,
1998. Should any share-owning employee leave PAL, he/she has the option to keep the shares or
sells (sic) his/her shares to his/her union or other employees currently employed by PAL.
(sic) the PAL Board of Directors. We, thus, become partners in the boardroom and together, we shall
address and find solutions to the wide range of problems besetting PAL.
3. In order for PAL to attain (a) degree of normalcy while we are tackling its problems, we would
request for a suspension of the Collective Bargaining Agreements (CBAs) for 10 years.[3]
On September 10, 1998, the Board of Directors of PALEA voted to accept Tans offer and
requested the Task Forces assistance in implementing the same. Union members, however, rejected
Tans offer. Under intense pressure from PALEA members, the unions directors subsequently resolved
to reject Tans offer.
On September 17, 1998, PAL informed the Task Force that it was shutting down its operations
effective September 23, 1998, preparatory to liquidating its assets and paying off its creditors. The
airline claimed that given its labor problems, rehabilitation was no longer feasible, and hence, the
airline had no alternative but to close shop.
On September 18, 1998, PALEA sought the intervention of the Office of the President in
immediately convening the parties, the PAL management, PALEA, ALPAP, and FASAP, including the
SEC under the direction of the Inter-Agency Task Force, to prevent the imminent closure of PAL.[4]
On September 19, 1998, PALEA informed the Department of Labor and Employment (DOLE) that
it had no objection to a referendum on the Tans offer. 2,799 out of 6,738 PALEA members cast their
votes in the referendum under DOLE supervision held on September 21-22, 1998. Of the votes cast,
1,055 voted in favor of Tans offer while 1,371 rejected it.
On September 23, 1998, PAL ceased its operations and sent notices of termination to its
employees.
Two days later, the PALEA board wrote President Estrada anew, seeking his intervention. PALEA
offered a 10-year moratorium on strikes and similar actions and a waiver of some of the economic
benefits in the existing CBA.[5] Tan, however, rejected this counter-offer.
On September 27, 1998, the PALEA board again wrote the President proposing the following
terms and conditions, subject to ratification by the general membership:
1. Each PAL employee shall be granted 60,000 shares of stock with a par value of P5.00, from Mr.
Lucio Tans shareholdings, with three (3) seats in the PAL Board and an additional seat from
government shares as indicated by His Excellency;
2. Likewise, PALEA shall, as far as practicable, be granted adequate representation in committees or
bodies which deal with matters affecting terms and conditions of employment;
3. To enhance and strengthen labor-management relations, the existing Labor-Management
Coordinating Council shall be reorganized and revitalized, with adequate representation from both PAL
management and PALEA;

4. To assure investors and creditors of industrial peace, PALEA agrees, subject to the ratification by
the general membership, (to) the suspension of the PAL-PALEA CBA for a period of ten (10) years,
provided the following safeguards are in place:
a. PAL shall continue recognizing PALEA as the duly certified bargaining agent of the
regular rank-and-file ground employees of the Company;
b. The union shop/maintenance of membership provision under the PAL-PALEA CBA shall
be respected.
c. No salary deduction, with full medical benefits.
5. PAL shall grant the benefits under the 26 July 1998 Memorandum of Agreement forged by and
between PAL and PALEA, to those employees who may opt to retire or be separated from the
company.
6. PALEA members who have been retrenched but have not received separation benefits shall be
granted priority in the hiring/rehiring of employees.
7. In the absence of applicable Company rule or regulation, the provisions of the Labor Code shall
apply.[6]
Among the signatories to the letter were herein petitioners Rivera, Ramiso, and Aranas, as
officers and/or members of the PALEA Board of Directors. PAL management accepted the PALEA
proposal and the necessary referendum was scheduled.
On October 2, 1998, 5,324 PALEA members cast their votes in a DOLE-supervised referendum.
Of the votes cast, 61% were in favor of accepting the PAL-PALEA agreement, while 34% rejected it.
On October 7, 1998, PAL resumed domestic operations. On the same date, seven officers and
members of PALEA filed this instant petition to annul the September 27, 1998 agreement entered into
between PAL and PALEA on the following grounds:
I object is actually the nullification of the PAL-PALEA agreement. As such, petitioners proper remedy is
PUBLIC RESPONDENTS GRAVELY ABUSED THEIR DISCRETION AND EXCEEDED THEIR
JURISDICTION IN ACTIVELY PURSUING THE CONCLUSION OF THE PAL-PALEA AGREEMENT AS THE
CONSTITUTIONAL RIGHTS TO SELF-ORGANIZATION AND COLLECTIVE BARGAINING, BEING
FOUNDED ON PUBLIC POLICY, MAY NOT BE WAIVED, NOR THE WAIVER, RATIFIED.
II
PUBLIC RESPONDENTS GRAVELY ABUSED THEIR DISCRETION AND EXCEEDED THEIR
JURISDICTION IN PRESIDING OVER THE CONCLUSION OF THE PAL-PALEA AGREEMENT UNDER
THREAT OF ABUSIVE EXERCISE OF PALS MANAGEMENT PREROGATIVE TO CLOSE BUSINESS USED AS
SUBTERFUGE FOR UNION-BUSTING.
The issues now for our resolution are:
(1) Is an original action for certiorari and prohibition the proper remedy to annul the PAL-
PALEA agreement of September 27, 1998;
Labor Relation Set VI * CBA Cases* Page 2 of 63
(2) Is the PAL-PALEA agreement of September 27, 1998, stipulating the suspension of the
PAL-PALEA CBA unconstitutional and contrary to public policy?
Anent the first issue, petitioners aver that public respondents as functionaries of the Task Force,
gravely abused their discretion and exceeded their jurisdiction when they actively pursued and
presided over the PAL-PALEA agreement.
Respondents, in turn, argue that the public respondents merely served as conciliators or
mediators, consistent with the mandate of A.O. No. 16 and merely supervised the conduct of
the October 3, 1998 referendum during which the PALEA members ratified the agreement. Thus,
public respondents did not perform any judicial and quasi-judicial act pertaining to
jurisdiction. Furthermore, respondents pray for the dismissal of the petition for violating the hierarchy
of courts doctrine enunciated in People v. Cuaresma[7] and Enrile v. Salazar.[8]
Petitioners allege grave abuse of discretion under Rule 65 of the 1997 Rules of Civil
Procedure. The essential requisites for a petition for certiorari under Rule 65 are: (1) the writ is
directed against a tribunal, a board, or an officer exercising judicial or quasi-judicial functions; (2)
such tribunal, board, or officer has acted without or in excess of jurisdiction, or with grave abuse of
discretion amounting to lack or excess of jurisdiction; and (3) there is no appeal or any plain, speedy,
and adequate remedy in the ordinary course of law.[9] For writs of prohibition, the requisites are: (1)
the impugned act must be that of a tribunal, corporation, board, officer, or person, whether exercising
judicial, quasi-judicial or ministerial functions; and (2) there is no plain, speedy, and adequate
remedy in the ordinary course of law. [10]
The assailed agreement is clearly not the act of a tribunal, board, officer, or person exercising
judicial, quasi-judicial, or ministerial functions. It is not the act of public respondents Finance
Secretary Edgardo Espiritu and Labor Secretary Bienvenido Laguesma as functionaries of the Task
Force. Neither is there a judgment, order, or resolution of either public respondents involved. Instead,
what exists is a contract between a private firm and one of its labor unions, albeit entered into with
the assistance of the Task Force. The first and second requisites for certiorari and prohibition are
therefore not present in this case.
Furthermore, there is available to petitioners a plain, speedy, and adequate remedy in the
ordinary course of law. While the petition is denominated as one for certiorari and prohibition, its
an ordinary civil action for annulment of contract, an action which properly falls under the jurisdiction
of the regional trial courts.[11] Neither certiorari nor prohibition is the remedy in the present case.
Petitioners further assert that public respondents were partial towards PAL management. They
allegedly pressured the PALEA leaders into accepting the agreement. Petitioners ask this Court to
examine the circumstances that led to the signing of said agreement. This would involve review of the
facts and factual issues raised in a special civil action for certiorari which is not the function of this
Court.[12]
Nevertheless, considering the prayer of the parties principally we shall look into the substance of
the petition, in the higher interest of justice[13] and in view of the public interest involved, inasmuch
as what is at stake here is industrial peace in the nations premier airline and flag carrier, a national
concern.

On the second issue, petitioners contend that the controverted PAL-PALEA agreement is void
because it abrogated the right of workers to self-organization[14] and their right to collective
bargaining.[15] Petitioners claim that the agreement was not meant merely to suspend the existing
PAL-PALEA CBA, which expires on September 30, 2000, but also to foreclose any renegotiation or any
possibility to forge a new CBA for a decade or up to 2008. It violates the protection to labor
policy[16] laid down by the Constitution.
Article 253-A of the Labor Code reads:
ART. 253-A. Terms of a Collective Bargaining Agreement. Any Collective Bargaining
Agreement that the parties may enter into shall, insofar as the representation aspect is concerned, be
for a term of five (5) years. No petition questioning the majority status of the incumbent bargaining
agent shall be entertained and no certification election shall be conducted by the Department of Labor
and Employment outside of the sixty-day period immediately before the date of expiry of such five-
year term of the Collective Bargaining Agreement. All other provisions of the Collective Bargaining
Agreement shall be renegotiated not later than three (3) years after its execution. Any agreement on
such other provisions of the Collective Bargaining Agreement entered into within six (6) months from
the date of expiry of the term of such other provisions as fixed in such Collective Bargaining
Agreement, shall retroact to the day immediately following such date. If any such agreement is
entered into beyond six months, the parties shall agree on the duration of the retroactivity thereof. In
case of a deadlock in the renegotiation of the collective bargaining agreement, the parties may
exercise their rights under this Code.
Under this provision, insofar as representation is concerned, a CBA has a term of five years, while the
other provisions, except for representation, may be negotiated not later than three years after the
execution.[17] Petitioners submit that a 10-year CBA suspension is inordinately long, way beyond the
maximum statutory life of a CBA, provided for in Article 253-A. By agreeing to a 10-year suspension,
PALEA, in effect, abdicated the workers constitutional right to bargain for another CBA at the
mandated time.
We find the argument devoid of merit.
A CBA is a contract executed upon request of either the employer or the exclusive bargaining
representative incorporating the agreement reached after negotiations with respect to wages, hours
of work and all other terms and conditions of employment, including proposals for adjusting any
grievances or questions arising under such agreement.[18] The primary purpose of a CBA is the
stabilization of labor-management relations in order to create a climate of a sound and stable
industrial peace.[19] In construing a CBA, the courts must be practical and realistic and give due
consideration to the context in which it is negotiated and the purpose which it is intended to serve.[20]
The assailed PAL-PALEA agreement was the result of voluntary collective bargaining negotiations
undertaken in the light of the severe financial situation faced by the employer, with the peculiar and
unique intention of not merely promoting industrial peace at PAL, but preventing the latters
closure. We find no conflict between said agreement and Article 253-A of the Labor Code. Article 253-
A has a two-fold purpose. One is to promote industrial stability and predictability. Inasmuch as the
agreement sought to promote industrial peace at PAL during its rehabilitation, said agreement
satisfies the first purpose of Article 253-A. The other is to assign specific timetables wherein
negotiations become a matter of right and requirement. Nothing in Article 253-A, prohibits the parties
Labor Relation Set VI * CBA Cases* Page 3 of 63
from waiving or suspending the mandatory timetables and agreeing on the remedies to enforce the
same.
In the instant case, it was PALEA, as the exclusive bargaining agent of PALs ground employees,
that voluntarily entered into the CBA with PAL. It was also PALEA that voluntarily opted for the 10-
year suspension of the CBA. Either case was the unions exercise of its right to collective
bargaining. The right to free collective bargaining, after all, includes the right to suspend it.
The acts of public respondents in sanctioning the 10-year suspension of the PAL-PALEA CBA did
not contravene the protection to labor policy of the Constitution. The agreement afforded full
protection to labor; promoted the shared responsibility between workers and employers; and the
exercised voluntary modes in settling disputes, including conciliation to foster industrial peace."[21]
Petitioners further allege that the 10-year suspension of the CBA under the PAL-PALEA
agreement virtually installed PALEA as a company union for said period, amounting to unfair labor
practice, in violation of Article 253-A of the Labor Code mandating that an exclusive bargaining agent
serves for five years only.
The questioned proviso of the agreement reads:
a. PAL shall continue recognizing PALEA as the duly certified-bargaining agent of the regular
rank-and-file ground employees of the Company;
Said proviso cannot be construed alone. In construing an instrument with several provisions, a
construction must be adopted as will give effect to all. Under Article 1374 of the Civil
Code,[22] contracts cannot be construed by parts, but clauses must be interpreted in relation to one
another to give effect to the whole. The legal effect of a contract is not determined alone by any
particular provision disconnected from all others, but from the whole read together.[23] The aforesaid
provision must be read within the context of the next clause, which provides:
b. The union shop/maintenance of membership provision under the PAL-PALEA CBA shall be
respected.
The aforesaid provisions, taken together, clearly show the intent of the parties to maintain union
security during the period of the suspension of the CBA. Its objective is to assure the continued
existence of PALEA during the said period. We are unable to declare the objective of union security an
unfair labor practice. It is State policy to promote unionism to enable workers to negotiate with
management on an even playing field and with more persuasiveness than if they were to individually
and separately bargain with the employer. For this reason, the law has allowed stipulations for union
shop and closed shop as means of encouraging workers to join and support the union of their choice
in the protection of their rights and interestsvis--vis the employer.[24]
Petitioners contention that the agreement installs PALEA as a virtual company union is also
untenable. Under Article 248 (d) of the Labor Code, a company union exists when the employer acts
[t]o initiate, dominate, assist or otherwise interfere with the formation or administration of any labor
organization, including the giving of financial or other support to it or its organizers or supporters. The
case records are bare of any showing of such acts by PAL.

We also do not agree that the agreement violates the five-year representation limit mandated by
Article 253-A. Under said article, the representation limit for the exclusive bargaining agent applies
only when there is an extant CBA in full force and effect. In the instant case, the parties agreed to
suspend the CBA and put in abeyance the limit on the representation period.
In sum, we are of the view that the PAL-PALEA agreement dated September 27, 1998, is a valid
exercise of the freedom to contract. Under the principle of inviolability of contracts guaranteed by the
Constitution,[25] the contract must be upheld.
WHEREFORE, there being no grave abuse of discretion shown, the instant petition is
DISMISSED. No pronouncement as to costs.SO ORDERED
Republic of the Philippines
Supreme Court
Manila
EN BANC
BANK OF THE PHILIPPINE ISLANDS, G.R. No. 164301
Petitioner,
- versus -
Promulgated:
BPI EMPLOYEES UNION-DAVAO CHAPTER-
FEDERATION OF UNIONS August 10, 2010
IN BPI UNIBANK,
Respondent.
x------------------------------------------------x
DECISION
LEONARDO-DE CASTRO, J.:
May a corporation invoke its merger with another corporation as a valid ground to exempt its
absorbed employees from the coverage of a union shop clause contained in its existing Collective
Bargaining Agreement (CBA) with its own certified labor union? That is the question we shall
endeavor to answer in this petition for review filed by an employer after the Court of Appeals decided
in favor of respondent union, which is the employees recognized collective bargaining representative.
At the outset, we should call to mind the spirit and the letter of the Labor Code provisions on
union security clauses, specifically Article 248 (e), which states, x x xNothing in this Code or in any
other law shall stop the parties from requiring membership in a recognized collective bargaining agent
as a condition for employment,except those employees who are already members of another union at
the time of the signing of the collective bargaining agreement.[1] This case which involves the
application of a collective bargaining agreement with a union shop clause should be resolved
principally from the standpoint of the clear provisions of our labor laws, and the express terms of the
CBA in question, and not by inference from the general consequence of the merger of corporations
under the Corporation Code, which obviously does not deal with and, therefore, is silent on the terms
and conditions of employment in corporations or juridical entities.
This issue must be resolved NOW, instead of postponing it to a future time when the CBA is
renegotiated as suggested by the Honorable Justice Arturo D. Brion because the same issue may still
Labor Relation Set VI * CBA Cases* Page 4 of 63
be resurrected in the renegotiation if the absorbed employees insist on their privileged status of being
exempt from any union shop clause or any variant thereof.
We find it significant to note that it is only the employer, Bank of the Philippine Islands (BPI), that
brought the case up to this Court via the instant petition for review; while the employees actually
involved in the case did not pursue the same relief, but had instead chosen in effect to acquiesce to
the decision of the Court of Appeals which effectively required them to comply with the union shop
clause under the existing CBA at the time of the merger of BPI with Far East Bank and Trust Company
(FEBTC), which decision had already become final and executory as to the aforesaid employees. By
not appealing the decision of the Court of Appeals, the aforesaid employees are bound by the said
Court of Appeals decision to join BPIs duly certified labor union. In view of the apparent acquiescence
of the affected FEBTC employees in the Court of Appeals decision, BPI should not have pursued this
petition for review. However, even assuming that BPI may do so, the same still cannot prosper.
What is before us now is a petition for review under Rule 45 of the Rules of Court of the
Decision[2] dated September 30, 2003 of the Court of Appeals, as reiterated in its Resolution[3] of June
9, 2004, reversing and setting aside the Decision[4] dated November 23, 2001 of Voluntary Arbitrator
Rosalina Letrondo-Montejo, in CA-G.R. SP No. 70445, entitled BPI Employees Union-Davao Chapter-
Federation of Unions in BPI Unibank v. Bank of the Philippine Islands, et al.
The antecedent facts are as follows:
On March 23, 2000, the Bangko Sentral ng Pilipinas approved the Articles of Merger executed on
January 20, 2000 by and between BPI, herein petitioner, and FEBTC.[5] This Article and Plan of
Merger was approved by the Securities and Exchange Commission on April 7, 2000.[6]
Pursuant to the Article and Plan of Merger, all the assets and liabilities of FEBTC were transferred to
and absorbed by BPI as the surviving corporation. FEBTC employees, including those in its different
branches across the country, were hired by petitioner as its own employees, with their status and
tenure recognized and salaries and benefits maintained.
Respondent BPI Employees Union-Davao Chapter - Federation of Unions in BPI Unibank (hereinafter
the Union, for brevity) is the exclusive bargaining agent of BPIs rank and file employees in Davao
City. The former FEBTC rank-and-file employees in Davao City did not belong to any labor union at
the time of the merger. Prior to the effectivity of the merger, or on March 31, 2000, respondent
Union invited said FEBTC employees to a meeting regarding the Union Shop Clause (Article II,
Section 2) of the existing CBA between petitioner BPI and respondent Union.[7]
The parties both advert to certain provisions of the existing CBA, which are quoted below:
ARTICLE I
Section 1. Recognition and Bargaining Unit The BANK recognizes the UNION as the
sole and exclusive collective bargaining representative of all the regular rank and
file employees of the Bank offices in Davao City.
Section 2. Exclusions

Section 3. Additional Exclusions
Section 4. Copy of Contract
ARTICLE II
Section 1. Maintenance of Membership All employees within the bargaining unit who are
members of the Union on the date of the effectivity of this Agreement as well as employees
within the bargaining unit who subsequently join or become members of the Union during
the lifetime of this Agreement shall as a condition of their continued employment with the
Bank, maintain their membership in the Union in good standing.
Section 2. Union Shop - New employees falling within the bargaining unit as defined in Article
I of this Agreement, who may hereafter be regularly employed by the Bank shall, within
thirty (30) days after they become regular employees, join the Union as a condition of their
continued employment. It is understood that membership in good standing in the Union is a
condition of their continued employment with the Bank.[8] (Emphases supplied.)
After the meeting called by the Union, some of the former FEBTC employees joined the
Union, while others refused. Later, however, some of those who initially joined retracted their
membership.[9]
Respondent Union then sent notices to the former FEBTC employees who refused to join, as
well as those who retracted their membership, and called them to a hearing regarding the
matter. When these former FEBTC employees refused to attend the hearing, the president of the
Union requested BPI to implement the Union Shop Clause of the CBA and to terminate their
employment pursuant thereto.[10]
After two months of management inaction on the request, respondent Union informed
petitioner BPI of its decision to refer the issue of the implementation of the Union Shop Clause of the
CBA to the Grievance Committee. However, the issue remained unresolved at this level and so it was
subsequently submitted for voluntary arbitration by the parties.[11]
Voluntary Arbitrator Rosalina Letrondo-Montejo, in a Decision[12] dated November 23, 2001,
ruled in favor of petitioner BPIs interpretation that the former FEBTC employees were not covered by
the Union Security Clause of the CBA between the Union and the Bank on the ground that the said
employees were not new employees who were hired and subsequently regularized, but were absorbed
employees by operation of law because the former employees of FEBTC can be considered assets and
liabilities of the absorbed corporation. The Voluntary Arbitrator concluded that the former FEBTC
employees could not be compelled to join the Union, as it was their constitutional right to join or not
to join any organization.
Respondent Union filed a Motion for Reconsideration, but the Voluntary Arbitrator denied the
same in an Order dated March 25, 2002.[13]
Dissatisfied, respondent then appealed the Voluntary Arbitrators decision to the Court of
Appeals. In the herein assailed Decision dated September 30, 2003, the Court of Appeals reversed
Labor Relation Set VI * CBA Cases* Page 5 of 63
and set aside the Decision of the Voluntary Arbitrator.[14] Likewise, the Court of Appeals denied herein
petitioners Motion for Reconsideration in a Resolution dated June 9, 2004.
The Court of Appeals pertinently ruled in its Decision:
A union-shop clause has been defined as a form of union security provision
wherein non-members may be hired, but to retain employment must become union
members after a certain period.
There is no question as to the existence of the union-shop clause in the CBA
between the petitioner-union and the company. The controversy lies in its application
to the absorbed employees.
This Court agrees with the voluntary arbitrator that the ABSORBED
employees are distinct and different from NEW employees BUT only in so far as their
employment service is concerned. The distinction ends there. In the case at bar, the
absorbed employees length of service from its former employer is tacked with their
employment with BPI. Otherwise stated, the absorbed employees service is
continuous and there is no gap in their service record.
This Court is persuaded that the similarities of new and absorbed employees
far outweighs the distinction between them. The similarities lies on the following, to
wit: (a) they have a new employer; (b) new working conditions; (c) new terms of
employment and; (d) new company policy to follow. As such, they should be
considered as new employees for purposes of applying the provisions of the CBA
regarding the union-shop clause.
To rule otherwise would definitely result to a very awkward and unfair
situation wherein the absorbed employees shall be in a different if not, better
situation than the existing BPI employees. The existing BPI employees by virtue of
the union-shop clause are required to pay the monthly union dues, remain as
members in good standing of the union otherwise, they shall be terminated from the
company, and other union-related obligations. On the other hand, the absorbed
employees shall enjoy the fruits of labor of the petitioner-union and its members for
nothing in exchange. Certainly, this would disturb industrial peace in the company
which is the paramount reason for the existence of the CBA and the union.
The voluntary arbitrators interpretation of the provisions of the CBA
concerning the coverage of the union-shop clause is at war with the spirit and the
rationale why the Labor Code itself allows the existence of such provision.
The Supreme Court in the case of Manila Mandarin Employees Union vs.
NLRC (G.R. No. 76989, September 29, 1987) rule, to quote:
This Court has held that a valid form of union security, and such a
provision in a collective bargaining agreement is not a restriction of the right
of freedom of association guaranteed by the Constitution.

A closed-shop agreement is an agreement whereby an employer
binds himself to hire only members of the contracting union who must
continue to remain members in good standing to keep their jobs. It is THE
MOST PRIZED ACHIEVEMENT OF UNIONISM. IT ADDS MEMBERSHIP AND
COMPULSORY DUES. By holding out to loyal members a promise of
employment in the closed-shop, it wields group solidarity. (Emphasis
supplied)
Hence, the voluntary arbitrator erred in construing the CBA literally at the expense
of industrial peace in the company.
With the foregoing ruling from this Court, necessarily, the alternative prayer of the
petitioner to require the individual respondents to become members or if they refuse, for this
Court to direct respondent BPI to dismiss them, follows.[15]
Hence, petitioners present recourse, raising the following issues:
I Union security is a generic term which is applied to and comprehends closed shop, union shop,
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE FORMER
FEBTC EMPLOYEES SHOULD BE CONSIDERED NEW EMPLOYEES OF BPI FOR PURPOSES OF
APPLYING THE UNION SHOP CLAUSE OF THE CBA
II
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT THE
VOLUNTARY ARBITRATORS INTERPRETATION OF THE COVERAGE OF THE UNION SHOP
CLAUSE IS AT WAR WITH THE SPIRIT AND THE RATIONALE WHY THE LABOR CODE ITSELF
ALLOWS THE EXISTENCE OF SUCH PROVISION[16]
In essence, the sole issue in this case is whether or not the former FEBTC employees that
were absorbed by petitioner upon the merger between FEBTC and BPI should be covered by the Union
Shop Clause found in the existing CBA between petitioner and respondent Union.
Petitioner is of the position that the former FEBTC employees are not new employees of BPI for
purposes of applying the Union Shop Clause of the CBA, on this note, petitioner points to Section 2,
Article II of the CBA, which provides:
New employees falling within the bargaining unit as defined in Article I of
this Agreement, who may hereafter be regularly employed by the Bank shall,
within thirty (30) days after they become regular employees, join the Union as a
condition of their continued employment. It is understood that membership in good
standing in the Union is a condition of their continued employment with the
Bank.[17] (Emphases supplied.)
Petitioner argues that the term new employees in the Union Shop Clause of the CBA is
qualified by the phrases who may hereafter be regularly employed and after they become regular
Labor Relation Set VI * CBA Cases* Page 6 of 63
employees which led petitioner to conclude that the new employees referred to in, and contemplated
by, the Union Shop Clause of the CBA were only those employees who were new to BPI, on account of
having been hired initially on a temporary or probationary status for possible regular employment at
some future date. BPI argues that the FEBTC employees absorbed by BPI cannot be considered as
new employees of BPI for purposes of applying the Union Shop Clause of the CBA.[18]
According to petitioner, the contrary interpretation made by the Court of Appeals of this
particular CBA provision ignores, or even defies, what petitioner assumes as its clear meaning and
scope which allegedly contradicts the Courts strict and restrictive enforcement of union security
agreements.
We do not agree.
Section 2, Article II of the CBA is silent as to how one becomes a regular employee of the
BPI for the first time. There is nothing in the said provision which requires that a new regular
employee first undergo a temporary or probationary status before being deemed as such under the
union shop clause of the CBA.
maintenance of membership or any other form of agreement which imposes upon employees the
obligation to acquire or retain union membership as a condition affecting employment. There is union
shop when all new regular employees are required to join the union within a certain period for their
continued employment. There is maintenance of membership shop when employees, who are union
members as of the effective date of the agreement, or who thereafter become members, must
maintain union membership as a condition for continued employment until they are promoted or
transferred out of the bargaining unit or the agreement is terminated. A closed-shop, on the other
hand, may be defined as an enterprise in which, by agreement between the employer and his
employees or their representatives, no person may be employed in any or certain agreed
departments of the enterprise unless he or she is, becomes, and, for the duration of the agreement,
remains a member in good standing of a union entirely comprised of or of which the employees in
interest are a part.[19]
In the case of Liberty Flour Mills Employees v. Liberty Flour Mills, Inc.,[20] we ruled that:
It is the policy of the State to promote unionism to enable the workers to negotiate
with management on the same level and with more persuasiveness than if they were to
individually and independently bargain for the improvement of their respective conditions. To
this end, the Constitution guarantees to them the rights to self-organization, collective
bargaining and negotiations and peaceful concerted actions including the right to strike in
accordance with law. There is no question that these purposes could be thwarted if every
worker were to choose to go his own separate way instead of joining his co-employees in
planning collective action and presenting a united front when they sit down to bargain with
their employers. It is for this reason that the law has sanctioned stipulations for the union
shop and the closed shop as a means of encouraging the workers to join and support the
labor union of their own choice as their representative in the negotiation of their demands
and the protection of their interest vis--vis the employer. (Emphasis ours.)

In other words, the purpose of a union shop or other union security arrangement is to
guarantee the continued existence of the union through enforced membership for the benefit of the
workers.
All employees in the bargaining unit covered by a Union Shop Clause in their CBA with management
are subject to its terms. However, under law and jurisprudence, the following kinds of employees are
exempted from its coverage, namely, employees who at the time the union shop agreement takes
effect are bona fide members of a religious organization which prohibits its members from joining
labor unions on religious grounds;[21] employees already in the service and already members of a
union other than the majority at the time the union shop agreement took effect;[22] confidential
employees who are excluded from the rank and file bargaining unit;[23] and employees excluded from
the union shop by express terms of the agreement.
When certain employees are obliged to join a particular union as a requisite for continued
employment, as in the case of Union Security Clauses, this condition is a valid restriction of the
freedom or right not to join any labor organization because it is in favor of unionism. This Court, on
occasion, has even held that a union security clause in a CBA is not a restriction of the right of
freedom of association guaranteed by the Constitution.[24]
Moreover, a closed shop agreement is an agreement whereby an employer binds himself to hire only
members of the contracting union who must continue to remain members in good standing to keep
their jobs. It is the most prized achievement of unionism. It adds membership and compulsory
dues. By holding out to loyal members a promise of employment in the closed shop, it wields group
solidarity.[25]
Indeed, the situation of the former FEBTC employees in this case clearly does not fall within
the first three exceptions to the application of the Union Shop Clause discussed earlier. No allegation
or evidence of religious exemption or prior membership in another union or engagement as a
confidential employee was presented by both parties. The sole category therefore in which petitioner
may prove its claim is the fourth recognized exception or whether the former FEBTC employees are
excluded by the express terms of the existing CBA between petitioner and respondent.
To reiterate, petitioner insists that the term new employees, as the same is used in the Union Shop
Clause of the CBA at issue, refers only to employees hired by BPI as non-regular employees who later
qualify for regular employment and become regular employees, and not those who, as a legal
consequence of a merger, are allegedly automatically deemed regular employees of BPI. However,
the CBA does not make a distinction as to how a regular employee attains such a status. Moreover,
there is nothing in the Corporation Law and the merger agreement mandating the automatic
employment as regular employees by the surviving corporation in the merger.
It is apparent that petitioner hinges its argument that the former FEBTC employees were
absorbed by BPI merely as a legal consequence of a merger based on the characterization by the
Voluntary Arbiter of these absorbed employees as included in the assets and liabilities of the dissolved
corporation - assets because they help the Bank in its operation and liabilities because redundant
employees may be terminated and company benefits will be paid to them, thus reducing the Banks
financial status. Based on this ratiocination, she ruled that the same are not new employees of BPI as
contemplated by the CBA at issue, noting that the Certificate of Filing of the Articles of Merger and
Plan of Merger between FEBTC and BPI stated that x x x the entire assets and liabilities of FAR
EASTERN BANK & TRUST COMPANY will be transferred to and absorbed by the BANK OF THE
Labor Relation Set VI * CBA Cases* Page 7 of 63
PHILIPPINE ISLANDS x x x (underlining supplied).[26] In sum, the Voluntary Arbiter upheld the
reasoning of petitioner that the FEBTC employees became BPI employees by operation of law because
they are included in the term assets and liabilities.
Absorbed FEBTC Employees are Neither Assets nor
Liabilities
In legal parlance, however, human beings are never embraced in the term assets and
liabilities. Moreover, BPIs absorption of former FEBTC employees was neither by operation of law nor
by legal consequence of contract. There was no government regulation or law that compelled the
merger of the two banks or the absorption of the employees of the dissolved corporation by the
surviving corporation. Had there been such law or regulation, the absorption of employees of the non-
surviving entities of the merger would have been mandatory on the surviving corporation.[27] In the
present case, the merger was voluntarily entered into by both banks presumably for some mutually
acceptable consideration. In fact, the Corporation Code does not also mandate the absorption of the
employees of the non-surviving corporation by the surviving corporation in the case of a
merger. Section 80 of the Corporation Code provides:
SEC. 80. Effects of merger or consolidation. The merger or consolidation, as provided in the
preceding sections shall have the following effects:
1. The constituent corporations shall become a single corporation which, in case of merger,
shall be the surviving corporation designated in the plan of merger; and, in case of
consolidation, shall be the consolidated corporation designated in the plan of consolidation;
2. The separate existence of the constituent corporations shall cease, except that of the
surviving or the consolidated corporation;
3. The surviving or the consolidated corporation shall possess all the rights, privileges,
immunities and powers and shall be subject to all the duties and liabilities of a corporation
organized under this Code;
4. The surviving or the consolidated corporation shall thereupon and thereafter possess all
the rights, privileges, immunities and franchises of each of the constituent corporations; and
all property, real or personal, and all receivables due on whatever account, including
subscriptions to shares and other choses in action, and all and every other interest of, or
belonging to, or due to each constituent corporation, shall be taken and deemed to be
transferred to and vested in such surviving or consolidated corporation without further act or
deed; and
5. The surviving or the consolidated corporation shall be responsible and liable for all the
liabilities and obligations of each of the constituent corporations in the same manner as if
such surviving or consolidated corporation had itself incurred such liabilities or obligations;
and any claim, action or proceeding pending by or against any of such constituent
corporations may be prosecuted by or against the surviving or consolidated corporation, as
the case may be. Neither the rights of creditors nor any lien upon the property of any of such
constituent corporations shall be impaired by such merger or consolidated.

Significantly, too, the Articles of Merger and Plan of Merger dated April 7, 2000 did not contain any
specific stipulation with respect to the employment contracts of existing personnel of the non-
surviving entity which is FEBTC. Unlike the Voluntary Arbitrator, this Court cannot uphold the
reasoning that the general stipulation regarding transfer of FEBTC assets and liabilities to BPI as set
forth in the Articles of Merger necessarily includes the transfer of all FEBTC employees into the
employ of BPI and neither BPI nor the FEBTC employees allegedly could do anything about it. Even if
it is so, it does not follow that the absorbed employees should not be subject to the terms and
conditions of employment obtaining in the surviving corporation.
The rule is that unless expressly assumed, labor contracts such as employment
contracts and collective bargaining agreements are not enforceable against a
transferee of an enterprise, labor contracts being in personam, thus binding only
between the parties. A labor contract merely creates an action in personam and
does not create any real right which should be respected by third parties. This
conclusion draws its force from the right of an employer to select his employees and
to decide when to engage them as protected under our Constitution, and the same
can only be restricted by law through the exercise of the police power.[28]
Furthermore, this Court believes that it is contrary to public policy to declare the former
FEBTC employees as forming part of the assets or liabilities of FEBTC that were transferred and
absorbed by BPI in the Articles of Merger. Assets and liabilities, in this instance, should be deemed to
refer only to property rights and obligations of FEBTC and do not include the employment contracts of
its personnel. A corporation cannot unilaterally transfer its employees to another employer like
chattel. Certainly, if BPI as an employer had the right to choose who to retain among FEBTCs
employees, FEBTC employees had the concomitant right to choose not to be absorbed by BPI. Even
though FEBTC employees had no choice or control over the merger of their employer with BPI, they
had a choice whether or not they would allow themselves to be absorbed by BPI.Certainly nothing
prevented the FEBTCs employees from resigning or retiring and seeking employment elsewhere
instead of going along with the proposed absorption.
Employment is a personal consensual contract and absorption by BPI of a former FEBTC
employee without the consent of the employee is in violation of an individuals freedom to contract. It
would have been a different matter if there was an express provision in the articles of merger that as
a condition for the merger, BPI was being required to assume all the employment contracts of all
existing FEBTC employees with the conformity of the employees. In the absence of such a provision in
the articles of merger, then BPI clearly had the business management decision as to whether or not
employ FEBTCs employees. FEBTC employees likewise retained the prerogative to allow themselves to
be absorbed or not; otherwise, that would be tantamount to involuntary servitude.
There appears to be no dispute that with respect to FEBTC employees that BPI chose not to
employ or FEBTC employees who chose to retire or be separated from employment instead of being
absorbed, BPIs assumed liability to these employees pursuant to the merger is FEBTCs liability to
them in terms of separation pay,[29] retirement pay[30] or other benefits that may be due them
depending on the circumstances.
Labor Relation Set VI * CBA Cases* Page 8 of 63
Legal Consequences of Mergers
Although not binding on this Court, American jurisprudence on the consequences of
voluntary mergers on the right to employment and seniority rights is persuasive and illuminating. We
quote the following pertinent discussion from the American Law Reports:
Several cases have involved the situation where as a result of mergers,
consolidations, or shutdowns, one group of employees, who had accumulated seniority at
one plant or for one employer, finds that their jobs have been discontinued except to the
extent that they are offered employment at the place or by the employer where the work is
to be carried on in the future.Such cases have involved the question whether such
transferring employees should be entitled to carry with them their accumulated seniority or
whether they are to be compelled to start over at the bottom of the seniority list in the "new"
job. It has been recognized in some cases that the accumulated seniority does not survive
and cannot be transferred to the "new" job.
In Carver v Brien (1942) 315 Ill App 643, 43 NE2d 597, the shop work of three
formerly separate railroad corporations, which had previously operated separate facilities,
was consolidated in the shops of one of the roads. Displaced employees of the other two
roads were given preference for the new jobs created in the shops of the railroad which took
over the work.A controversy arose between the employees as to whether the displaced
employees were entitled to carry with them to the new jobs the seniority rights they had
accumulated with their prior employers, that is, whether the rosters of the three
corporations, for seniority purposes, should be "dovetailed" or whether the transferring
employees should go to the bottom of the roster of their new employer. Labor
representatives of the various systems involved attempted to work out an agreement which,
in effect, preserved the seniority status obtained in the prior employment on other roads,
and the action was for specific performance of this agreement against a demurring group of
the original employees of the railroad which was operating the consolidated shops.The relief
sought was denied, the court saying that, absent some specific contract provision otherwise,
seniority rights were ordinarily limited to the employment in which they were earned, and
concluding that the contract for which specific performance was sought was not such a
completed and binding agreement as would support such equitable relief, since the railroad,
whose concurrence in the arrangements made was essential to their effectuation, was not a
party to the agreement.
Where the provisions of a labor contract provided that in the event that a
trucker absorbed the business of another private contractor or common carrier, or was a
party to a merger of lines, the seniority of the employees absorbed or affected thereby
should be determined by mutual agreement between the trucker and the unions involved, it
was held in Moore v International Brotherhood of Teamsters, etc. (1962, Ky) 356 SW2d 241,
that the trucker was not required to absorb the affected employees as well as the business,
the court saying that they could find no such meaning in the above clause, stating that it
dealt only with seniority, and not with initial employment. Unless and until the absorbing
company agreed to take the employees of the company whose business was being absorbed,
no seniority problem was created, said the court, hence the provision of the contract could
have no application. Furthermore, said the court, it did not require that the absorbing

company take these employees, but only that if it did take them the question of seniority
between the old and new employees would be worked out by agreement or else be
submitted to the grievance procedure.[31] (Emphasis ours.)
Indeed, from the tenor of local and foreign authorities, in voluntary mergers, absorption of
the dissolved corporations employees or the recognition of the absorbed employees service with their
previous employer may be demanded from the surviving corporation if required by provision of law or
contract. The dissent of Justice Arturo D. Brion tries to make a distinction as to the terms and
conditions of employment of the absorbed employees in the case of a corporate merger or
consolidation which will, in effect, take away from corporate management the prerogative to make
purely business decisions on the hiring of employees or will give it an excuse not to apply the CBA in
force to the prejudice of its own employees and their recognized collective bargaining agent. In this
regard, we disagree with Justice Brion.
Justice Brion takes the position that because the surviving corporation continues the personality of
the dissolved corporation and acquires all the latters rights and obligations, it is duty-bound to absorb
the dissolved corporations employees, even in the absence of a stipulation in the plan of merger. He
proposes that this interpretation would provide the necessary protection to labor as it spares workers
from being left in legal limbo.
However, there are instances where an employer can validly discontinue or terminate the
employment of an employee without violating his right to security of tenure. Among others, in case of
redundancy, for example, superfluous employees may be terminated and such termination would be
authorized under Article 283 of the Labor Code.[32]
Moreover, assuming for the sake of argument that there is an obligation to hire or absorb all
employees of the non-surviving corporation, there is still no basis to conclude that the terms and
conditions of employment under a valid collective bargaining agreement in force in the surviving
corporation should not be made to apply to the absorbed employees.
The Corporation Code and the Subject Merger Agreement
are Silent on Efficacy, Terms and Conditions of
Employment Contracts
The lack of a provision in the plan of merger regarding the transfer of employment contracts to the
surviving corporation could have very well been deliberate on the part of the parties to the merger, in
order to grant the surviving corporation the freedom to choose who among the dissolved corporations
employees to retain, in accordance with the surviving corporations business needs. If terminations,
for instance due to redundancy or labor-saving devices or to prevent losses, are done in good faith,
they would be valid.The surviving corporation too is duty-bound to protect the rights of its own
employees who may be affected by the merger in terms of seniority and other conditions of their
employment due to the merger. Thus, we are not convinced that in the absence of a stipulation in the
merger plan the surviving corporation was compelled, or may be judicially compelled, to absorb all
employees under the same terms and conditions obtaining in the dissolved corporation as the
Labor Relation Set VI * CBA Cases* Page 9 of 63
surviving corporation should also take into consideration the state of its business and its obligations to
its own employees, and to their certified collective bargaining agent or labor union.
Even assuming we accept Justice Brions theory that in a merger situation the surviving corporation
should be compelled to absorb the dissolved corporations employees as a legal consequence of the
merger and as a social justice consideration, it bears to emphasize his dissent also recognizes that the
employee may choose to end his employment at any time by voluntarily resigning. For the employee
to be absorbed by BPI, it requires the employees implied or express consent. It is because of this
human element in employment contracts and the personal, consensual nature thereof that we cannot
agree that, in a merger situation, employment contracts are automatically transferable from one
entity to another in the same manner that a contract pertaining to purely proprietary rights such as a
promissory note or a deed of sale of property is perfectly and automatically transferable to the
surviving corporation.
That BPI is the same entity as FEBTC after the merger is but a legal fiction intended as a tool to
adjudicate rights and obligations between and among the merged corporations and the persons that
deal with them. Although in a merger it is as if there is no change in the personality of the employer,
there is in reality a change in the situation of the employee. Once an FEBTC employee is absorbed,
there are presumably changes in his condition of employment even if his previous tenure and salary
rate is recognized by BPI.It is reasonable to assume that BPI would have different rules and
regulations and company practices than FEBTC and it is incumbent upon the former FEBTC employees
to obey these new rules and adapt to their new environment. Not the least of the changes in
employment condition that the absorbed FEBTC employees must face is the fact that prior to the
merger they were employees of an unorganized establishment and after the merger they became
employees of a unionized company that had an existing collective bargaining agreement with the
certified union. This presupposes that the union who is party to the collective bargaining agreement is
the certified union that has, in the appropriate certification election, been shown to represent a
majority of the members of the bargaining unit.
Likewise, with respect to FEBTC employees that BPI chose to employ and who also chose to
be absorbed, then due to BPIs blanket assumption of liabilities and obligations under the articles of
merger, BPI was bound to respect the years of service of these FEBTC employees and to pay the
same, or commensurate salaries and other benefits that these employees previously enjoyed with
FEBTC.
As the Union likewise pointed out in its pleadings, there were benefits under the CBA that the former
FEBTC employees did not enjoy with their previous employer. As BPI employees, they will enjoy all
these CBA benefits upon their absorption. Thus, although in a sense BPI is continuing FEBTCs
employment of these absorbed employees, BPIs employment of these absorbed employees was not
under exactly the same terms and conditions as stated in the latters employment contracts with
FEBTC. This further strengthens the view that BPI and the former FEBTC employees voluntarily
contracted with each other for their employment in the surviving corporation.
Proper Appreciation of the Term New Employees Under
the CBA
In any event, it is of no moment that the former FEBTC employees retained the regular
status that they possessed while working for their former employer upon their absorption by

petitioner. This fact would not remove them from the scope of the phrase new employees as
contemplated in the Union Shop Clause of the CBA, contrary to petitioners insistence that the term
new employees only refers to those who are initially hired as non-regular employees for possible
regular employment.
The Union Shop Clause in the CBA simply states that new employees who during the
effectivity of the CBA may be regularly employed by the Bank must join the union within thirty (30)
days from their regularization. There is nothing in the said clause that limits its application to
only new employees who possess non-regular status, meaning probationary status, at the start of
their employment. Petitioner likewise failed to point to any provision in the CBA expressly excluding
from the Union Shop Clause new employees who are absorbed as regular employees from the
beginning of their employment. What is indubitable from the Union Shop Clause is that upon the
effectivity of the CBA, petitioners new regular employees (regardless of the manner by which they
became employees of BPI) are required to join the Union as a condition of their continued
employment.
The dissenting opinion of Justice Brion dovetails with Justice Carpios view only in their
restrictive interpretation of who are new employees under the CBA. To our dissenting colleagues, the
phrase new employees (who are covered by the union shop clause) should only include new
employees who were hired as probationary during the life of the CBA and were later granted regular
status. They propose that the former FEBTC employees who were deemed regular employees from
the beginning of their employment with BPI should be treated as a special class of employees and be
excluded from the union shop clause.
Justice Brion himself points out that there is no clear, categorical definition of new employee in the
CBA. In other words, the term new employee as used in the union shop clause is used broadly without
any qualification or distinction. However, the Court should not uphold an interpretation of the term
new employee based on the general and extraneous provisions of the Corporation Code on merger
that would defeat, rather than fulfill, the purpose of the union shop clause. To reiterate, the provision
of the Article 248(e) of the Labor Code in point mandates that nothing in the said Code or any other
law should stop the parties from requiring membership in a recognized collective bargaining agent as
a condition of employment.
Significantly, petitioner BPI never stretches its arguments so far as to state that the
absorbed employees should be deemed old employees who are not covered by the Union Shop
Clause. This is not surprising.
By law and jurisprudence, a merger only becomes effective upon approval by the Securities
and Exchange Commission (SEC) of the articles of merger. In Associated Bank v. Court of
Appeals,[33] we held:
The procedure to be followed is prescribed under the Corporation Code. Section 79
of said Code requires the approval by the Securities and Exchange Commission
(SEC) of the articles of merger which, in turn, must have been duly approved by a
majority of the respective stockholders of the constituent corporations. The same
provision further states that the merger shall be effective only upon the issuance by
the SEC of a certificate of merger. The effectivity date of the merger is crucial for
Labor Relation Set VI * CBA Cases* Page 10 of 63
determining when the merged or absorbed corporation ceases to exist; and when its
rights, privileges, properties as well as liabilities pass on to the surviving
corporation. (Emphasis ours.)
In other words, even though BPI steps into the shoes of FEBTC as the surviving corporation,
BPI does so at a particular point in time, i.e., the effectivity of the merger upon the SECs issuance of
a certificate of merger. In fact, the articles of merger themselves provided that both BPI and FEBTC
will continue their respective business operations until the SEC issues the certificate of merger and in
the event SEC does not issue such a certificate, they agree to hold each other blameless for the non-
consummation of the merger.
Considering the foregoing principle, BPI could have only become the employer of the FEBTC
employees it absorbed after the approval by the SEC of the merger. If the SEC did not approve the
merger, BPI would not be in the position to absorb the employees of FEBTC at all. Indeed, there is
evidence on record that BPI made the assignments of its absorbed employees in BPI effective April
10, 2000, or after the SECs approval of the merger.[34] In other words, BPI became the employer of
the absorbed employees only at some point after the effectivity of the merger, notwithstanding the
fact that the absorbed employees years of service with FEBTC were voluntarily recognized by BPI.
Even assuming for the sake of argument that we consider the absorbed FEBTC employees as
old employees of BPI who are not members of any union (i.e., it is their date of hiring by FEBTC and
not the date of their absorption that is considered), this does not necessarily exclude them from the
union security clause in the CBA. The CBA subject of this case was effective from April 1, 1996 until
March 31, 2001. Based on the allegations of the former FEBTC employees themselves, there were
former FEBTC employees who were hired by FEBTC after April 1, 1996 and if their date of hiring by
FEBTC is considered as their date of hiring by BPI, they would undeniably be considered new
employees of BPI within the contemplation of the Union Shop Clause of the said CBA. Otherwise, it
would lead to the absurd situation that we would discriminate not only between new BPI employees
(hired during the life of the CBA) and former FEBTC employees (absorbed during the life of the CBA)
but also among the former FEBTC employees themselves. In other words, we would be treating
employees who are exactly similarly situated (i.e., the group of absorbed FEBTC employees)
differently. This hardly satisfies the demands of equality and justice.
Petitioner limited itself to the argument that its absorbed employees do not fall within the
term new employees contemplated under the Union Shop Clause with the apparent objective of
excluding all, and not just some, of the former FEBTC employees from the application of the Union
Shop Clause.
However, in law or even under the express terms of the CBA, there is no special class of employees
called absorbed employees. In order for the Court to apply or not apply the Union Shop Clause, we
can only classify the former FEBTC employees as either old or new. If they are not old employees,
they are necessarily new employees. If they are new employees, the Union Shop Clause did not
distinguish between new employees who are non-regular at their hiring but who subsequently become
regular and new employees who are absorbed as regular and permanent from the beginning of their
employment. The Union Shop Clause did not so distinguish, and so neither must we.

No Substantial Distinction Under the CBA Between
Regular Employees Hired After Probationary Status and
Regular Employees Hired After the Merger
Verily, we agree with the Court of Appeals that there are no substantial differences between
a newly hired non-regular employee who was regularized weeks or months after his hiring and a new
employee who was absorbed from another bank as a regular employee pursuant to a merger, for
purposes of applying the Union Shop Clause. Both employees were hired/employed only after the CBA
was signed. At the time they are being required to join the Union, they are both already regular rank
and file employees of BPI. They belong to the same bargaining unit being represented by the
Union. They both enjoy benefits that the Union was able to secure for them under the CBA. When
they both entered the employ of BPI, the CBA and the Union Shop Clause therein were already in
effect and neither of them had the opportunity to express their preference for unionism or not. We
see no cogent reason why the Union Shop Clause should not be applied equally to these two types of
new employees, for they are undeniably similarly situated.
The effect or consequence of BPIs so-called absorption of former FEBTC employees should be limited
to what they actually agreed to, i.e. recognition of the FEBTC employees years of service, salary rate
and other benefits with their previous employer. The effect should not be stretched so far as
to exempt former FEBTC employees from the existing CBA terms, company policies and rules which
apply to employees similarly situated. If the Union Shop Clause is valid as to other new regular BPI
employees, there is no reason why the same clause would be a violation of the absorbed employees
freedom of association.
Non-Application of Union Shop Clause Contrary to the
Policy of the Labor Code and Inimical to Industrial Peace
It is but fair that similarly situated employees who enjoy the same privileges of a CBA should
be likewise subject to the same obligations the CBA imposes upon them. A contrary interpretation of
the Union Shop Clause will be inimical to industrial peace and workers solidarity. This unfavorable
situation will not be sufficiently addressed by asking the former FEBTC employees to simply pay
agency fees to the Union in lieu of union membership, as the dissent of Justice Carpio suggests. The
fact remains that other new regular employees, to whom the absorbed employees should be
compared, do not have the option to simply pay the agency fees and they must join the Union or face
termination.
Petitioners restrictive reading of the Union Shop Clause could also inadvertently open an
avenue, which an employer could readily use, in order to dilute the membership base of the certified
union in the collective bargaining unit (CBU). By entering into a voluntary merger with a non-
unionized company that employs more workers, an employer could get rid of its existing union by the
simple expedient of arguing that the absorbed employees are not new employees, as are commonly
understood to be covered by a CBAs union security clause. This could then lead to a new majority
within the CBU that could potentially threaten the majority status of the existing union and,
ultimately, spell its demise as the CBUs bargaining representative. Such a dreaded but not entirely
far-fetched scenario is no different from the ingenious and creative union-busting schemes that
corporations have fomented throughout the years, which this Court has foiled time and again in order
to preserve and protect the valued place of labor in this jurisdiction consistent with the Constitutions
mandate of insuring social justice.
Labor Relation Set VI * CBA Cases* Page 11 of 63
There is nothing in the Labor Code and other applicable laws or the CBA provision at issue
that requires that a new employee has to be of probationary or non-regular status at the beginning of
the employment relationship. An employer may confer upon a new employee the status of regular
employment even at the onset of his engagement.Moreover, no law prohibits an employer from
voluntarily recognizing the length of service of a new employee with a previous employer in relation
to computation of benefits or seniority but it should not unduly be interpreted to exclude them from
the coverage of the CBA which is a binding contractual obligation of the employer and employees.
Indeed, a union security clause in a CBA should be interpreted to give meaning and effect to
its purpose, which is to afford protection to the certified bargaining agent and ensure that the
employer is dealing with a union that represents the interests of the legally mandated percentage of
the members of the bargaining unit.
The union shop clause offers protection to the certified bargaining agent by ensuring that
future regular employees who (a) enter the employ of the company during the life of the CBA; (b) are
deemed part of the collective bargaining unit; and (c) whose number will affect the number of
members of the collective bargaining unit will be compelled to join the union. Such compulsion has
legal effect, precisely because the employer by voluntarily entering in to a union shop clause in a CBA
with the certified bargaining agent takes on the responsibility of dismissing the new regular employee
who does not join the union.
Without the union shop clause or with the restrictive interpretation thereof as proposed in the
dissenting opinions, the company can jeopardize the majority status of the certified union by
excluding from union membership all new regular employees whom the Company will absorb in future
mergers and all new regular employees whom the Company hires as regular from the beginning of
their employment without undergoing a probationary period. In this manner, the Company can
increase the number of members of the collective bargaining unit and if this increase is not
accompanied by a corresponding increase in union membership, the certified union may lose its
majority status and render it vulnerable to attack by another union who wishes to represent the same
bargaining unit.[35]
Or worse, a certified union whose membership falls below twenty percent (20%) of the total members
of the collective bargaining unit may lose its status as a legitimate labor organization altogether, even
in a situation where there is no competing union.[36] In such a case, an interested party may file for
the cancellation of the unions certificate of registration with the Bureau of Labor Relations.[37]
Plainly, the restrictive interpretation of the union shop clause would place the certified unions very
existence at the mercy and control of the employer. Relevantly, only BPI, the employer appears to be
interested in pursuing this case. The former FEBTC employees have not joined BPI in this appeal.
For the foregoing reasons, Justice Carpios proposal to simply require the former FEBTC to pay agency
fees is wholly inadequate to compensate the certified union for the loss of additional membership
supposedly guaranteed by compliance with the union shop clause. This is apart from the fact that
treating these absorbed employees as a special class of new employees does not encourage worker
solidarity in the company since another class of new employees (i.e. those whose were hired as

probationary and later regularized during the life of the CBA) would not have the option of
substituting union membership with payment of agency fees.
Justice Brion, on the other hand, appears to recognize the inherent unfairness of perpetually
excluding the absorbed employees from the ambit of the union shop clause. He proposes that this
matter be left to negotiation by the parties in the next CBA. To our mind, however, this proposal does
not sufficiently address the issue. With BPI already taking the position that employees absorbed
pursuant to its voluntary mergers with other banks are exempt from the union shop clause, the
chances of the said bank ever agreeing to the inclusion of such employees in a future CBA is next to
nil more so, if BPIs narrow interpretation of the union shop clause is sustained by this Court.
Right of an Employee not to Join a Union is not Absolute
and Must Give Way to the Collective Good of All Members
of the Bargaining Unit
The dissenting opinions place a premium on the fact that even if the former FEBTC
employees are not old employees, they nonetheless were employed as regular and permanent
employees without a gap in their service. However, an employees permanent and regular
employment status in itself does not necessarily exempt him from the coverage of a union shop
clause.
In the past this Court has upheld even the more stringent type of union security clause, i.e., the
closed shop provision, and held that it can be made applicable to old employees who are already
regular and permanent but have chosen not to join a union. In the early case of Juat v. Court of
Industrial Relations,[38] the Court held that an old employee who had no union may be compelled to
join the union even if the collective bargaining agreement (CBA) imposing the closed shop provision
was only entered into seven years after of the hiring of the said employee. To quote from that
decision:
A closed-shop agreement has been considered as one form of union security
whereby only union members can be hired and workers must remain union
members as a condition of continued employment. The requirement for employees
or workers to become members of a union as a condition for employment redounds
to the benefit and advantage of said employees because by holding out to loyal
members a promise of employment in the closed-shop the union wields group
solidarity. In fact, it is said that "the closed-shop contract is the most prized
achievement of unionism."
xxxx
This Court had categorically held in the case of Freeman Shirt Manufacturing Co.,
Inc., et al. vs. Court of Industrial Relations, et al., G.R. No. L-16561, Jan. 28, 1961,
that the closed-shop proviso of a collective bargaining agreement entered into
between an employer and a duly authorized labor union is applicable not only to the
employees or laborers that are employed after the collective bargaining agreement
had been entered into but also to old employees who are not members of any labor
union at the time the said collective bargaining agreement was entered into. In
other words, if an employee or laborer is already a member of a labor union
Labor Relation Set VI * CBA Cases* Page 12 of 63
different from the union that entered into a collective bargaining agreement with
the employer providing for a closed-shop, said employee or worker cannot be
obliged to become a member of that union which had entered into a collective
bargaining agreement with the employer as a condition for his continued
employment. (Emphasis and underscoring supplied.)
Although the present case does not involve a closed shop provision that included even old employees,
the Juat example is but one of the cases that laid down the doctrine that the right not to join a union
is not absolute. Theoretically, there is nothing in law or jurisprudence to prevent an employer and a
union from stipulating that existing employees (who already attained regular and permanent status
but who are not members of any union) are to be included in the coverage of a union security
clause. Even Article 248(e) of the Labor Code only expressly exempts old employees who already
have a union from inclusion in a union security clause.[39]
Contrary to the assertion in the dissent of Justice Carpio, Juat has not been overturned by Victoriano
v. Elizalde Rope Workers Union[40] nor by Reyes v. Trajano.[41] The factual milieus of these three cases
are vastly different.
In Victoriano, the issue that confronted the Court was whether or not employees who were members
of the Iglesia ni Kristo (INK) sect could be compelled to join the union under a closed shop provision,
despite the fact that their religious beliefs prohibited them from joining a union. In that case, the
Court was asked to balance the constitutional right to religious freedom against a host of other
constitutional provisions including the freedom of association, the non-establishment clause, the non-
impairment of contracts clause, the equal protection clause, and the social justice provision. In the
end, the Court held that religious freedom, although not unlimited, is a fundamental personal right
and liberty, and has a preferred position in the hierarchy of values.[42]
However, Victoriano is consistent with Juat since they both affirm that the right to refrain from joining
a union is not absolute. The relevant portion of Victoriano is quoted below:
The right to refrain from joining labor organizations recognized by Section 3 of the
Industrial Peace Act is, however, limited. The legal protection granted to such right
to refrain from joining is withdrawn by operation of law, where a labor union and an
employer have agreed on a closed shop, by virtue of which the employer may
employ only member of the collective bargaining union, and the employees must
continue to be members of the union for the duration of the contract in order to
keep their jobs. Thus Section 4 (a) (4) of the Industrial Peace Act, before its
amendment by Republic Act No. 3350, provides that although it would be an unfair
labor practice for an employer "to discriminate in regard to hire or tenure of
employment or any term or condition of employment to encourage or discourage
membership in any labor organization" the employer is, however, not precluded
"from making an agreement with a labor organization to require as a condition of
employment membership therein, if such labor organization is the representative of
the employees." By virtue, therefore, of a closed shop agreement, before the
enactment of Republic Act No. 3350, if any person, regardless of his religious
beliefs, wishes to be employed or to keep his employment, he must become a

member of the collective bargaining union. Hence, the right of said employee not to
join the labor union is curtailed and withdrawn.[43] (Emphases supplied.)
If Juat exemplified an exception to the rule that a person has the right not to join a
union, Victoriano merely created an exception to the exception on the ground of religious freedom.
Reyes, on the other hand, did not involve the interpretation of any union security clause. In that case,
there was no certified bargaining agent yet since the controversy arose during a certification
election. In Reyes, the Court highlighted the idea that the freedom of association included the right
not to associate or join a union in resolving the issue whether or not the votes of members of the INK
sect who were part of the bargaining unit could be excluded in the results of a certification election,
simply because they were not members of the two contesting unions and were expected to have
voted for NO UNION in view of their religious affiliation. The Court upheld the inclusion of the votes of
the INK members since in the previous case of Victoriano we held that INK members may not be
compelled to join a union on the ground of religious freedom and even withoutVictoriano every
employee has the right to vote no union in a certification election as part of his freedom of
association. However, Reyes is not authority for Justice Carpios proposition that an employee who is
not a member of any union may claim an exemption from an existing union security clause because
he already has regular and permanent status but simply prefers not to join a union.
The other cases cited in Justice Carpios dissent on this point are likewise inapplicable. Basa v.
Federacion Obrera de la Industria Tabaquera y Otros Trabajadores de Filipinas,[44] Anucension v.
National Labor Union,[45] and Gonzales v. Central Azucarera de Tarlac Labor Union[46] all involved
members of the INK. In line with Victoriano, these cases upheld the INK members claimed exemption
from the union security clause on religious grounds. In the present case, the former FEBTC employees
never claimed any religious grounds for their exemption from the Union Shop Clause. As for Philips
Industrial Development, Inc. v. National Labor Relations Corporation[47] and Knitjoy Manufacturing,
Inc. v. Ferrer-Calleja,[48] the employees who were exempted from joining the respondent union or
who were excluded from participating in the certification election were found to be not members of
the bargaining unit represented by respondent union and were free to form/join their own union. In
the case at bar, it is undisputed that the former FEBTC employees were part of the bargaining unit
that the Union represented. Thus, the rulings in Philips and Knitjoy have no relevance to the issues at
hand.
Time and again, this Court has ruled that the individual employees right not to join a union
may be validly restricted by a union security clause in a CBA[49] and such union security clause is not
a violation of the employees constitutional right to freedom of association.[50]
It is unsurprising that significant provisions on labor protection of the 1987 Constitution are found in
Article XIII on Social Justice. The constitutional guarantee given the right to form unions[51] and the
State policy to promote unionism[52] have social justice considerations. In Peoples Industrial and
Commercial Employees and Workers Organization v. Peoples Industrial and Commercial
Corporation,[53] we recognized that [l]abor, being the weaker in economic power and resources than
capital, deserve protection that is actually substantial and material.
Labor Relation Set VI * CBA Cases* Page 13 of 63
The rationale for upholding the validity of union shop clauses in a CBA, even if they impinge
upon the individual employees right or freedom of association, is not to protect the union for the
unions sake. Laws and jurisprudence promote unionism and afford certain protections to the certified
bargaining agent in a unionized company because a strong and effective union presumably benefits all
employees in the bargaining unit since such a union would be in a better position to demand
improved benefits and conditions of work from the employer. This is the rationale behind the State
policy to promote unionism declared in the Constitution, which was elucidated in the above-cited case
of Liberty Flour Mills Employees v. Liberty Flour Mills, Inc.[54]
In the case at bar, since the former FEBTC employees are deemed covered by the Union Shop Clause,
they are required to join the certified bargaining agent, which supposedly has gathered the support of
the majority of workers within the bargaining unit in the appropriate certification proceeding. Their
joining the certified union would, in fact, be in the best interests of the former FEBTC employees for it
unites their interests with the majority of employees in the bargaining unit. It encourages employee
solidarity and affords sufficient protection to the majority status of the union during the life of the
CBA which are the precisely the objectives of union security clauses, such as the Union Shop Clause
involved herein. We are indeed not being called to balance the interests of individual employees as
against the State policy of promoting unionism, since the employees, who were parties in the court
below, no longer contested the adverse Court of Appeals decision. Nonetheless, settled jurisprudence
has already swung the balance in favor of unionism, in recognition that ultimately the individual
employee will be benefited by that policy. In the hierarchy of constitutional values, this Court has
repeatedly held that the right to abstain from joining a labor organization is subordinate to the policy
of encouraging unionism as an instrument of social justice.
Also in the dissenting opinion of Justice Carpio, he maintains that one of the dire consequences to the
former FEBTC employees who refuse to join the union is the forfeiture of their retirement
benefits. This is clearly not the case precisely because BPI expressly recognized under the merger the
length of service of the absorbed employees with FEBTC.Should some refuse to become members of
the union, they may still opt to retire if they are qualified under the law, the applicable retirement
plan, or the CBA, based on their combined length of service with FEBTC and BPI. Certainly, there is
nothing in the union shop clause that should be read as to curtail an employees eligibility to apply for
retirement if qualified under the law, the existing retirement plan, or the CBA as the case may be.
In sum, this Court finds it reasonable and just to conclude that the Union Shop Clause of the
CBA covers the former FEBTC employees who were hired/employed by BPI during the effectivity of
the CBA in a manner which petitioner describes as absorption. A contrary appreciation of the facts of
this case would, undoubtedly, lead to an inequitable and very volatile labor situation which this Court
has consistently ruled against.
In the case of former FEBTC employees who initially joined the union but later withdrew their
membership, there is even greater reason for the union to request their dismissal from the employer
since the CBA also contained a Maintenance of Membership Clause.
A final point in relation to procedural due process, the Court is not unmindful that the former
FEBTC employees refusal to join the union and BPIs refusal to enforce the Union Shop Clause in this
instance may have been based on the honest belief that the former FEBTC employees were not
covered by said clause. In the interest of fairness, we believe the former FEBTC employees should be
 Labor Relation Set VI * CBA Cases* Page 14 of 63

given a fresh thirty (30) days from notice of finality of this decision to join the union before the union The bone of contention between the parties was whether or not the absorbed FEBTC
demands BPI to terminate their employment under the Union Shop Clause, assuming said clause has employees fell within the definition of new employees under the Union Shop Clause, such that they
been carried over in the present CBA and there has been no material change in the situation of the may be required to join respondent union and if they fail to do so, the Union may request BPI to
parties. terminate their employment, as the Union in fact did in the present case. Needless to state, BPI
refused to accede to the Unions request. Although BPI won the initial battle at the Voluntary
WHEREFORE, the petition is hereby DENIED, and the Decision dated September 30, 2003 of Arbitrator level, BPIs position was rejected by the Court of Appeals which ruled that the Voluntary
the Court of Appeals is AFFIRMED, subject to the thirty (30) day notice requirement imposed Arbitrators interpretation of the Union Shop Clause was at war with the spirit and rationale why the
herein. Former FEBTC employees who opt not to become union members but who qualify for Labor Code allows the existence of such provision. On review with this Court, we upheld the appellate
retirement shall receive their retirement benefits in accordance with law, the applicable retirement courts ruling and disposed of the case as follows:
plan, or the CBA, as the case may be.SO ORDERED.
WHEREFORE, the petition is hereby DENIED, and the Decision dated
Republic of the Philippines September 30, 2003 of the Court of Appeals is AFFIRMED, subject to the thirty (30)
Supreme Court day notice requirement imposed herein. Former FEBTC employees who opt not to
Manila become union members but who qualify for retirement shall receive their retirement
EN BANC benefits in accordance with law, the applicable retirement plan, or the CBA, as the
BANK OF THE PHILIPPINE ISLANDS, G.R. No. 164301 case may be.[4]

Petitioner, Notwithstanding our affirmation of the applicability of the Union Shop Clause to former
Present: FEBTC employees, for reasons already extensively discussed in the August 10, 2010 Decision, even
- versus - now BPI continues to protest the inclusion of said employees in the Union Shop Clause.

BPI EMPLOYEES UNION-DAVAO CHAPTER- Promulgated: In seeking the reversal of our August 10, 2010 Decision, petitioner insists that the parties to the CBA
FEDERATION OF UNIONS IN BPI UNIBANK, clearly intended to limit the application of the Union Shop Clause only to new employees who were
Respondent. October 19, 2011 hired as non-regular employees but later attained regular status at some point after hiring. FEBTC
x--------------------------------------------------x employees cannot be considered new employees as BPI merely stepped into the shoes of FEBTC as an
employer purely as a consequence of the merger.[5]
RESOLUTION
LEONARDO-DE CASTRO, J.: Petitioner likewise relies heavily on the dissenting opinions of our respected colleagues,
Associate Justices Antonio T. Carpio and Arturo D. Brion. From both dissenting opinions, petitioner
In the present incident, petitioner Bank of the Philippine Islands (BPI) moves for derives its contention that the situation of absorbed employees can be likened to old employees of
reconsideration[1] of our Decision dated August 10, 2010, holding that former employees of the Far BPI, insofar as their full tenure with FEBTC was recognized by BPI and their salaries were maintained
East Bank and Trust Company (FEBTC) absorbed by BPI pursuant to the two banks merger in 2000 and safeguarded from diminution but such absorbed employees cannot and should not be treated in
were covered by the Union Shop Clause in the then existing collective bargaining agreement exactly the same way as old BPI employees for there are substantial differences between
(CBA)[2] of BPI with respondent BPI Employees Union-Davao Chapter-Federation of Unions in BPI them.[6] Although petitioner admits that there are similarities between absorbed and new employees,
Unibank (the Union). they insist there are marked differences between them as well. Thus, adopting Justice Brions stance,
petitioner contends that the absorbed FEBTC employees should be considered a sui generis group of
To recall, the Union Shop Clause involved in this long standing controversy provided, thus: employees whose classification will not be duplicated until BPI has another merger where it would be
the surviving corporation.[7] Apparently borrowing from Justice Carpio, petitioner propounds that the
ARTICLE II Union Shop Clause should be strictly construed since it purportedly curtails the right of the absorbed
xxxx employees to abstain from joining labor organizations.[8]

Section 2. Union Shop - New employees falling within the bargaining unit as defined
in Article I of this Agreement, who may hereafter be regularly employed by the Bank shall,
within thirty (30) days after they become regular employees, join the Union as a condition of
their continued employment. It is understood that membership in good standing in the Union
is a condition of their continued employment with the Bank.[3] (Emphases supplied.)
Pursuant to our directive, the Union filed its Comment[9] on the Motion for Reconsideration. In
opposition to petitioners arguments, the Union, in turn, adverts to our discussion in the August 10,
2010 Decision regarding the voluntary nature of the merger between BPI and FEBTC, the lack of an
express stipulation in the Articles of Merger regarding the transfer of employment contracts to the
surviving corporation, and the consensual nature of employment contracts as valid bases for the
conclusion that former FEBTC employees should be deemed new employees.[10] The Union argues that

the creation of employment relations between former FEBTC employees and BPI (i.e., BPIs selection
and engagement of former FEBTC employees, its payment of their wages, power of dismissal and of
control over the employees conduct) occurred after the merger, or to be more precise, after the
Securities and Exchange Commissions (SEC) approval of the merger.[11] The Union likewise points out
that BPI failed to offer any counterargument to the Courts reasoning that:
The rationale for upholding the validity of union shop clauses in a CBA, even if they
impinge upon the individual employee's right or freedom of association, is not to protect the
union for the union's sake. Laws and jurisprudence promote unionism and afford certain
protections to the certified bargaining agent in a unionized company because a strong and
effective union presumably benefits all employees in the bargaining unit since such a union
would be in a better position to demand improved benefits and conditions of work from the
employer. x x x.
x x x Nonetheless, settled jurisprudence has already swung the balance in favor of
unionism, in recognition that ultimately the individual employee will be benefited by that
policy. In the hierarchy of constitutional values, this Court has repeatedly held that the right
to abstain from joining a labor organization is subordinate to the policy of encouraging
unionism as an instrument of social justice.[12]
While most of the arguments offered by BPI have already been thoroughly addressed in the August
10, 2010 Decision, we find that a qualification of our ruling is in order only with respect to the
interpretation of the provisions of the Articles of Merger and its implications on the former FEBTC
employees security of tenure.
Taking a second look on this point, we have come to agree with Justice Brions view that it is more in
keeping with the dictates of social justice and the State policy of according full protection to labor to
deem employment contracts as automatically assumed by the surviving corporation in a merger, even
in the absence of an express stipulation in the articles of merger or the merger plan. In his dissenting
opinion, Justice Brion reasoned that:
To my mind, due consideration of Section 80 of the Corporation Code, the
constitutionally declared policies on work, labor and employment, and the specific
FEBTC-BPI situation i.e., a merger with complete "body and soul" transfer of all that
FEBTC embodied and possessed and where both participating banks were willing
(albeit by deed, not by their written agreement) to provide for the affected human
resources by recognizing continuity of employment should point this Court to a
declaration that in a complete merger situation where there is total takeover by one
corporation over another and there is silence in the merger agreement on what the
fate of the human resource complement shall be, the latter should not be left in
legal limbo and should be properly provided for, by compelling the surviving entity
to absorb these employees. This is what Section 80 of the Corporation Code
commands, as the surviving corporation has the legal obligation to assume all the
obligations and liabilities of the merged constituent corporation.
Not to be forgotten is that the affected employees managed, operated and
worked on the transferred assets and properties as their means of livelihood; they
constituted a basic component of their corporation during its existence. In a merger
Labor Relation Set VI * CBA Cases* Page 15 of 63
and consolidation situation, they cannot be treated without consideration of the
applicable constitutional declarations and directives, or, worse, be simply
disregarded. If they are so treated, it is up to this Court to read and interpret the
law so that they are treated in accordance with the legal requirements of mergers
and consolidation, read in light of the social justice, economic and social provisions
of our Constitution. Hence, there is a need for the surviving corporation to take
responsibility for the affected employees and to absorb them into its workforce
where no appropriate provision for the merged corporation's human resources
component is made in the Merger Plan.[13]
By upholding the automatic assumption of the non-surviving corporations existing employment
contracts by the surviving corporation in a merger, the Court strengthens judicial protection of the
right to security of tenure of employees affected by a merger and avoids confusion regarding the
status of their various benefits which were among the chief objections of our dissenting
colleagues. However, nothing in this Resolution shall impair the right of an employer to terminate the
employment of the absorbed employees for a lawful or authorized cause or the right of such an
employee to resign, retire or otherwise sever his employment, whether before or after the merger,
subject to existing contractual obligations. In this manner, Justice Brions theory of automatic
assumption may be reconciled with the majoritys concerns with the successor employers prerogative
to choose its employees and the prohibition against involuntary servitude.
Notwithstanding this concession, we find no reason to reverse our previous pronouncement that the
absorbed FEBTC employees are covered by the Union Shop Clause.
Even in our August 10, 2010 Decision, we already observed that the legal fiction in the law on
mergers (that the surviving corporation continues the corporate existence of the non-surviving
corporation) is mainly a tool to adjudicate the rights and obligations between and among the merged
corporations and the persons that deal with them.[14] Such a legal fiction cannot be unduly extended
to an interpretation of a Union Shop Clause so as to defeat its purpose under labor law. Hence, we
stated in the Decision that:
In any event, it is of no moment that the former FEBTC employees retained the
regular status that they possessed while working for their former employer upon
their absorption by petitioner. This fact would not remove them from the scope of
the phrase "new employees" as contemplated in the Union Shop Clause of the CBA,
contrary to petitioner's insistence that the term "new employees" only refers to
those who are initially hired as non-regular employees for possible regular
employment.
The Union Shop Clause in the CBA simply states that "new employees" who
during the effectivity of the CBA "may be regularly employed" by the Bank must join
the union within thirty (30) days from their regularization. There is nothing in the
said clause that limits its application to only new employees who possess non-
regular status, meaning probationary status, at the start of their employment.
Petitioner likewise failed to point to any provision in the CBA expressly excluding
from the Union Shop Clause new employees who are "absorbed" as regular
employees from the beginning of their employment. What is indubitable from the

Union Shop Clause is that upon the effectivity of the CBA, petitioner's new regular
employees (regardless of the manner by which they became employees of BPI) are
required to join the Union as a condition of their continued employment.[15]
Although by virtue of the merger BPI steps into the shoes of FEBTC as a successor employer as if the
former had been the employer of the latters employees from the beginning it must be emphasized
that, in reality, the legal consequences of the merger only occur at a specific date, i.e., upon its
effectivity which is the date of approval of the merger by the SEC. Thus, we observed in the Decision
that BPI and FEBTC stipulated in the Articles of Merger that they will both continue their respective
business operations until the SEC issues the certificate of merger and in the event no such certificate
is issued, they shall hold each other blameless for the non-consummation of the merger.[16] We
likewise previously noted that BPI made its assignments of the former FEBTC employees effective on
April 10, 2000, or after the SEC approved the merger.[17] In other words, the obligation of BPI to pay
the salaries and benefits of the former FEBTC employees and its right of discipline and control over
them only arose with the effectivity of the merger.Concomitantly, the obligation of former FEBTC
employees to render service to BPI and their right to receive benefits from the latter also arose upon
the effectivity of the merger.What is material is that all of these legal consequences of the merger
took place during the life of an existing and valid CBA between BPI and the Union wherein they have
mutually consented to include a Union Shop Clause.
From the plain, ordinary meaning of the terms of the Union Shop Clause, it covers
employees who (a) enter the employ of BPI during the term of the CBA; (b) are part of the bargaining
unit (defined in the CBA as comprised of BPIs rank and file employees); and (c) become regular
employees without distinguishing as to the manner they acquire their regular status. Consequently,
the number of such employees may adversely affect the majority status of the Union and even its
existence itself, as already amply explained in the Decision.
Indeed, there are differences between (a) new employees who are hired as probationary or
temporary but later regularized, and (b) new employees who, by virtue of a merger, are absorbed
from another company as regular and permanent from the beginning of their employment with the
surviving corporation. It bears reiterating here that these differences are too insubstantial to warrant
the exclusion of the absorbed employees from the application of the Union Shop Clause. In the
Decision, we noted that:
Verily, we agree with the Court of Appeals that there are no substantial
differences between a newly hired non-regular employee who was regularized
weeks or months after his hiring and a new employee who was absorbed from
another bank as a regular employee pursuant to a merger, for purposes of applying
the Union Shop Clause. Both employees were hired/employed only after the CBA
was signed. At the time they are being required to join the Union, they are both
already regular rank and file employees of BPI. They belong to the same bargaining
unit being represented by the Union. They both enjoy benefits that the Union was
able to secure for them under the CBA. When they both entered the employ of BPI,
the CBA and the Union Shop Clause therein were already in effect and neither of
them had the opportunity to express their preference for unionism or not. We see
no cogent reason why the Union Shop Clause should not be applied equally to these
two types of new employees, for they are undeniably similarly situated.[18]
Labor Relation Set VI * CBA Cases* Page 16 of 63
Again, it is worthwhile to highlight that a contrary interpretation of the Union Shop Clause
would dilute its efficacy and put the certified union that is supposedly being protected thereby at the
mercy of management. For if the former FEBTC employees had no say in the merger of its former
employer with another bank, as petitioner BPI repeatedly decries on their behalf, the Union likewise
could not prevent BPI from proceeding with the merger which undisputedly affected the number of
employees in the bargaining unit that the Union represents and may negatively impact on the Unions
majority status. In this instance, we should be guided by the principle that courts must place a
practical and realistic construction upon a CBA, giving due consideration to the context in which it is
negotiated and purpose which it is intended to serve.[19]
We now come to the question: Does our affirmance of our ruling that former FEBTC
employees absorbed by BPI are covered by the Union Shop Clause violate their right to security of
tenure which we expressly upheld in this Resolution? We answer in the negative.
In Rance v. National Labor Relations Commission,[20] we held that:
It is the policy of the state to assure the right of workers to "security of tenure"
(Article XIII, Sec. 3 of the New Constitution, Section 9, Article II of the 1973 Constitution).
The guarantee is an act of social justice. When a person has no property, his job may
possibly be his only possession or means of livelihood. Therefore, he should be protected
against any arbitrary deprivation of his job. Article 280 of the Labor Code has
construed security of tenure as meaning that "the employer shall not terminate the services
of an employee except for a just cause or when authorized by" the Code. x x x (Emphasis
supplied.)
We have also previously held that the fundamental guarantee of security of tenure and due
process dictates that no worker shall be dismissed except for a just and authorized cause provided by
law and after due process is observed.[21] Even as we now recognize the right to continuous, unbroken
employment of workers who are absorbed into a new company pursuant to a merger, it is but logical
that their employment may be terminated for any causes provided for under the law or in
jurisprudence without violating their right to security of tenure. As Justice Carpio discussed in his
dissenting opinion, it is well-settled that termination of employment by virtue of a union security
clause embodied in a CBA is recognized in our jurisdiction.[22] In Del Monte Philippines, Inc. v.
Saldivar,[23] we explained the rationale for this policy in this wise:
Article 279 of the Labor Code ordains that "in cases of regular employment,
the employer shall not terminate the services of an employee except for a just
cause or when authorized by [Title I, Book Six of the Labor Code]." Admittedly, the
enforcement of a closed-shop or union security provision in the CBA as a ground for
termination finds no extension within any of the provisions under Title I, Book Six of
the Labor Code. Yet jurisprudence has consistently recognized, thus: "It is State
policy to promote unionism to enable workers to negotiate with management on an
even playing field and with more persuasiveness than if they were to individually
and separately bargain with the employer. For this reason, the law has allowed
stipulations for 'union shop' and 'closed shop' as means of encouraging workers to
join and support the union of their choice in the protection of their rights and
interests vis-a-vis the employer."[24] (Emphasis supplied.)

Although it is accepted that non-compliance with a union security clause is a valid ground for
an employees dismissal, jurisprudence dictates that such a dismissal must still be done in accordance
with due process. This much we decreed in General Milling Corporation v. Casio,[25] to wit:
The Court reiterated in Malayang Samahan ng mga Manggagawa sa M.
Greenfield v. Ramos that:
While respondent company may validly dismiss the employees
expelled by the union for disloyalty under the union security clause of the
collective bargaining agreement upon the recommendation by the union,
this dismissal should not be done hastily and summarily thereby eroding
the employees' right to due process, self-organization and security of
tenure. The enforcement of union security clauses is authorized by
law provided such enforcement is not characterized by arbitrariness, and
always with due process. Even on the assumption that the federation had
valid grounds to expel the union officers, due process requires that these
union officers be accorded a separate hearing by respondent company.
The twin requirements of notice and hearing constitute the essential elements of
procedural due process. The law requires the employer to furnish the employee sought to be
dismissed with two written notices before termination of employment can be legally effected:
(1) a written notice apprising the employee of the particular acts or omissions for which his
dismissal is sought in order to afford him an opportunity to be heard and to defend himself
with the assistance of counsel, if he desires, and (2) a subsequent notice informing the
employee of the employer's decision to dismiss him. This procedure is mandatory and its
absence taints the dismissal with illegality.
Irrefragably, GMC cannot dispense with the requirements of notice and hearing
before dismissing Casio, et al. even when said dismissal is pursuant to the closed shop
provision in the CBA. The rights of an employee to be informed of the charges against him
and to reasonable opportunity to present his side in a controversy with either the company
or his own union are not wiped away by a union security clause or a union shop clause in a
collective bargaining agreement. x x x[26] (Emphases supplied.)
In light of the foregoing, we find it appropriate to state that, apart from the fresh thirty (30)-
day period from notice of finality of the Decision given to the affected FEBTC employees to join the
Union before the latter can request petitioner to terminate the formers employment, petitioner must
still accord said employees the twin requirements of notice and hearing on the possibility that they
may have other justifications for not joining the Union. Similar to our August 10, 2010 Decision, we
reiterate that our ruling presupposes there has been no material change in the situation of the parties
in the interim.
WHEREFORE, the Motion for Reconsideration is DENIED. The Decision dated August 10, 2010
is AFFIRMED, subject to the qualifications that:
(a) Petitioner is deemed to have assumed the employment contracts of the Far East Bank
and Trust Company (FEBTC) employees upon effectivity of the merger withoutbreak in the continuity
of their employment, even without express stipulation in the Articles of Merger; and
Labor Relation Set VI * CBA Cases* Page 17 of 63
(b) Aside from the thirty (30) days, counted from notice of finality of the August 10, 2010
Decision, given to former FEBTC employees to join the respondent, said employees shall be accorded
full procedural due process before their employment may be terminated.SO ORDERED.
THIRD DIVISION
NASECO GUARDS ASSOCIATION-PEMA (NAGA- G.R. No. 165442
PEMA),Petitioner,
- versus - Promulgated:
NATIONAL SERVICE CORPORATION (NASECO),
Respondent. August 25, 2010
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
VILLARAMA, JR., J.:
This petition for review on certiorari under Rule 45 assails the Decision[1] dated May 27,
2004 of the Court of Appeals (CA) in CA-G.R. SP No. 76667. The appellate court set aside the January
15, 2003[2] and March 11, 2003[3] Orders of the Department of Labor and Employment (DOLE) and
ordered the latter to allow the parties to adduce evidence in support of their respective positions.
The facts follow.
Respondent National Service Corporation (NASECO) is a wholly-owned subsidiary of the
Philippine National Bank (PNB) organized under the Corporation Code in 1975.It supplies security and
manpower services to different clients such as the Securities and Exchange Commission, the
Philippine Deposit Insurance Corporation, Food Terminal Incorporated, Forex Corporation and
PNB. Petitioner NASECO Guards Association-PEMA (NAGA-PEMA) is the collective bargaining
representative of the regular rank and file security guards of respondent. NASECO Employees Union-
PEMA (NEMU-PEMA) is the collective bargaining representative of the regular rank and file (non-
security) employees of respondent such as messengers, janitors, typists, clerks and radio-telephone
operators.[4]
On December 2, 1993, respondent entered into a memorandum of agreement[5] with
petitioner. The terms of the agreement covered the monetary claims of the petitioner such as salary
adjustments, conversion of salary scheme under Republic Act (R.A.) No. 6758 [6] to R.A. No.
6727,[7] signing bonus, leaves and other benefits. A year after, petitioner demanded full negotiation
for a collective bargaining agreement (CBA) with the respondent and submitted its proposals thereto.
On June 8, 1995, petitioner and respondent agreed to sign a CBA on non-economic terms.[8]
On September 24, 1996, petitioner filed a notice of strike because of respondents refusal to
bargain for economic benefits in the CBA. Following conciliation hearings, the parties again commenced
CBA negotiations and started to resolve the issues on wage increase, productivity bonus, incentive
bonus, allowances, and other benefits but failed to reach an agreement.
Meanwhile, respondent and NEMU-PEMA entered into a CBA on non-economic
terms.[9] Unfortunately, a dispute among the leaders of NEMU-PEMA arose and at a certain point,

leadership of the organization was unclear. Hence, the negotiations concerning the economic terms of
the CBA were put on hold until the internal dispute could be resolved.
On April 29, 1997, petitioner filed a notice of strike before the National Conciliation and
Mediation Board (NCMB) against respondent and PNB due to a bargaining deadlock. The following
day, NEMU-PEMA likewise filed a notice of strike against respondent and PNB on the ground of unfair
labor practices.[10] Efforts by the NCMB to conciliate failed and pursuant to Article 263(g) of the Labor
Code,[11] as amended, then DOLE Secretary Cresenciano B. Trajano assumed jurisdiction over the
strike notices onJune 25, 1998.[12]
On November 19, 1999, then DOLE Secretary Bienvenido E. Laguesma issued a
Resolution[13] directing petitioner and respondent to execute a new CBA incorporating therein his
dispositions regarding benefits of the employees as to wage increase, productivity bonus, vacation
and sick leave, medical allowances and signing bonus. Respondent was further ordered to negotiate,
for purposes of collective bargaining agreement, with NEMU-PEMA led by its president,
Ligaya Valencia. The charge of unfair labor practice against respondent and PNB was dismissed.[14]
Respondent promptly filed a petition for certiorari before the CA questioning the DOLE
Secretarys order and arguing that the ruling of the DOLE Secretary in favor of the unions and
awarding them monetary benefits totaling five hundred thirty-one million four hundred forty-six
thousand six hundred sixty-six and 67/100 (P531,446,666.67) was inimical and deleterious to its
financial standing and will result in closure and cessation of business for the company.
By Decision[15] dated March 19, 2001 (first CA Decision), the CA partly granted the petition
and ruled that a recomputation and reevaluation of the benefits awarded was in order.
WHEREFORE, the instant petition is partly GRANTED in that the case is remanded to
the Secretary of Labor for purposes of recomputation and reevaluation of the CBA
benefits.SO ORDERED.[16]In compliance with the CA directive, then DOLE Secretary Patricia
A. Sto. Tomas conducted several clarificatory hearings. On January 15, 2003, Secretary Sto.
Tomas issued an Order which provides:
From the above, it is indubitable that the total cost to NASECO of our questioned award
would amount to only P322,725,000, not P531,446,666.67 as claimed by the company.
Thus, ourNovember 19, 1999 Order is hereby affirmed en toto.
WHEREFORE, judgment is hereby rendered:
1. [D]irecting NAGA-PEMA and NASECO to execute a new collective bargaining
agreement effective November 1, 1993, incorporating therein the dispositions
contained in our November 19, 1999 Order as well as all other items agreed
upon by the parties.
Labor Relation Set VI * CBA Cases* Page 18 of 63
2. Ordering NASECO to negotiate with NEMA-PEMA for a new collective
bargaining agreement.
The charges of unfair labor practice against NASECO and PNB are dismissed for lack of
merit.SO ORDERED.[17]
Respondent filed a motion for reconsideration with the DOLE Secretary which was denied
on March 11, 2003.
Respondent thus filed a petition for certiorari with the CA arguing that the DOLE Secretary,
in issuing the January 15, 2003 Order deprived respondent of due process of law for there was
no reevaluation that took place in the DOLE. It also argued that the order merely recomputed the
DOLE Secretarys initial award of P531,446,666.67 and reduced it to P322,725,000.00, contrary to the
ruling of the CA to recompute and reevaluate. Respondent claimed that what the DOLE Secretary
should have done was to let the parties introduce evidence to show the proper computation of the
monetary awards under the approved CBA.
In its second Decision dated May 27, 2004, the CA granted the petition, thus:
WHEREFORE, the orders dated 15 January 2003 and 11 March 2003 are hereby SET
ASIDE and the case remanded to the public respondent to allow the parties to
adduce evidence in support of their respective positions.SO ORDERED.[18]
A motion for reconsideration was filed by herein petitioner but the same was denied by the
CA on September 22, 2004[19] finding no reason to reverse and set aside its earlier decision.
Petitioner now comes to this Court for relief by way of a petition for review
on certiorari seeking to set aside and reverse the May 27, 2004 Decision and the September 22,
2004 Resolution of the CA.
The main issue in this case is whether or not the respondents right to due process was violated. A side
issue raised by the petitioner is whether or not PNB, being the undisputed owner of and exercising control
over respondent, should be made liable to pay the CBA benefits awarded to the petitioner.
Petitioner argues first that there was no violation of due process because respondent was
never prohibited by the DOLE Secretary to submit supporting documents when the instant case was
pending on remand. Petitioner contends that due process is properly observed when there is an
opportunity to be heard, to present evidence and to file pleadings, which was never denied to
respondent.
Second, petitioner argues that the CA erred in stating that respondent was a company
operating at a loss and therefore cannot be expected to act generously and confer upon its employees
additional benefits exceeding what is mandated by law. It is the petitioners position that based on the
no loss, no profit policy of respondent with PNB, respondent in truth has no pocket of its own and is,
in effect, one (1) and the same with PNB with regard to financial gains and/or liabilities. Thus,

petitioners contend that the CBA benefits should be shouldered by PNB considering the poor financial
condition of respondent. To support such claim, petitioner submitted evidence[20] to show that PNB is
in superb financial condition and is very much capable of shouldering the CBA award.[21]
Respondent on the other hand maintains that the DOLE Secretary violated its right to due
process when she merely recomputed the CBA award instead of reevaluating the entire case and
allowing it to present supporting documents in accordance with the first CA decision.[22] It claims that the
order of the CA to reevaluate included and required a full assessment of the case together with reception
of evidence such as financial statements, and the omission of such is a violation of its right to due
process.
As to the petitioners argument that respondent and PNB are essentially the same when it
comes to financial condition, respondent contends that although a subsidiary, it has a separate and
distinct personality from PNB with its own charter. Hence, the issue of PNBs financial well-being is
immaterial in this case.
The petition is partly meritorious.
In simple terms, the constitutional guarantee of due process requires that a litigant be given
a day in court. It is the availability of the opportunity to be heard that determines whether or not due
process was violated. A litigant may or may not avail of the opportunity to be heard but as long as
such was made available to him/her, there is no violation of the due process clause. In the case
of Lumiqued v. Exevea,[23] this Court declared that [a]s long as a party was given the opportunity to
defend his interests in due course, he cannot be said to have been denied due process of law, for this
opportunity to be heard is the very essence of due process. Moreover, this constitutional mandate is
deemed satisfied if a person is granted an opportunity to seek reconsideration of the action or ruling
complained of.
The respondents right to due process in this case has not been denied. The order in the first
CA decision to recompute and reevaluate was satisfied when the DOLE Secretary reexamined their
initial findings and adjusted the awarded benefits. A reevaluation, contrary to what the respondent
claims, is a process by which a person or office (in this case the DOLE secretary) revisits its own initial
pronouncement and makes another assessment of its findings. In simple terms, to reevaluate is to
take another look at a previous matter in issue. A reevaluation does not necessitate the introduction
of new materials for review nor does it require a full hearing for new arguments.
From a procedural standpoint, a reevaluation is a continuation of the original case and not a
new proceeding. Hence, the evidence, financial reports and other documents submitted by the parties
in the course of the original proceeding are to be visited and reviewed again. In this light, the
respondent has been given the opportunity to be heard by the DOLE Secretary.
Also, contrary to the claim of the respondent that it was barred by the DOLE Secretary to
introduce supporting documents during the recomputation and reevaluation, the records show that an
Labor Relation Set VI * CBA Cases* Page 19 of 63
Order by then Secretary of Labor Patricia A. Sto. Tomas dated July 11, 2002 specifically allowed both
parties to submit their respective computations as regards the awarded benefits. To wit:
WHEREFORE, the Bureau of Working Conditions is hereby directed to
submit to this Office a detailed computation of the CBA benefits indicated in the
resolution of November 19, 2001 within twenty (20) days from receipt of this
Order. The parties may submit their own computations to the Bureau for
validation.SO ORDERED.[24] (Italics supplied.)
It is thus inaccurate for the respondent to claim that it was denied due process because it had
all the opportunity to introduce any supporting document in the course of the recomputation and
reevaluation of the DOLE Secretary. Respondent admits that it did attach the financial statements and
other documents in support of its alleged financial incapacity to pay the CBA awarded benefits, the same
evidence it had earlier submitted before the CA (Memorandum in the first CA decision) in the motion for
reconsideration of the DOLE Secretarys January 15, 2003 Order.[25] There is thus no showing that the
DOLE Secretary denied respondent this basic constitutional right.
On the issue of liability, petitioner contends that PNB should be held liable to shoulder the
CBA benefits awarded to them by virtue of it being a company having full financial, managerial and
functional control over respondent as its subsidiary, and by reason of the unique no loss, no profit
scheme implemented between respondent and PNB.
We are not persuaded.
Verily, what the petitioner is asking this Court to do is to pierce the veil of corporate fiction of
respondent and hold PNB (being the mother company) liable for the CBA benefits.
In Concept Builders, Inc. v. NLRC,[26] we explained the doctrine of piercing the corporate veil,
as follows:
It is a fundamental principle of corporation law that a corporation is an entity separate
and distinct from its stockholders and from other corporations to which it may be connected.
But, this separate and distinct personality of a corporation is merely a fiction created by law for
convenience and to promote justice. So, when the notion of separate juridical personality is
used to defeat public convenience, justify wrong, protect fraud or defend crime, or is used as a
device to defeat the labor laws, this separate personality of the corporation may be disregarded
or the veil of corporate fiction pierced. This is true likewise when the corporation is merely an
adjunct, a business conduit or an alter ego of another corporation.
Also in Pantranco Employees Association (PEA-PTGWO) v. National Labor Relations
Commission,[27] this Court ruled:

Whether the separate personality of the corporation should be pierced hinges on obtaining
facts appropriately pleaded or proved. However, any piercing of the corporate veil has to be
done with caution, albeit the Court will not hesitate to disregard the corporate veil when it is
misused or when necessary in the interest of justice. After all, the concept of corporate entity
was not meant to promote unfair objectives.
Applying the doctrine to the case at bar, we find no reason to pierce the corporate veil of
respondent and go beyond its legal personality. Control, by itself, does not mean that the controlled
corporation is a mere instrumentality or a business conduit of the mother company. Even control over
the financial and operational concerns of a subsidiary company does not by itself call for disregarding
its corporate fiction. There must be a perpetuation of fraud behind the control or at least a fraudulent
or illegal purpose behind the control in order to justify piercing the veil of corporate fiction. Such
fraudulent intent is lacking in this case.
Petitioner argues that the appreciation, analysis and inquiry of this case may go beyond the
presentation of respondent, and therefore must include the PNB, the bank being the undisputed whole
owner of respondent and the sole provider of funds for the companys operations and for the payment of
wages and benefits of the employees, under the no loss, no profit scheme.[28]
We disagree. There is no showing that such no loss, no profit scheme between respondent
and PNB was implemented to defeat public convenience, justify wrong, protect fraud or defend crime,
or is used as a device to defeat the labor laws, nor does the scheme show that respondent is a mere
business conduit or alter ego of PNB. Absent proof of these circumstances, respondents corporate
personality cannot be pierced.
It is apparent that petitioner wants the Court to disregard the corporate personality of
respondent and directly go after PNB in order for it to collect the CBA benefits. On the same breath,
however, petitioner argues that ultimately it is PNB, by virtue of the no loss, no profit scheme, which
shoulders and provides the funds for financial liabilities of respondent including wages and benefits of
employees. If such scheme was indeed true as the petitioner presents it, then there was absolutely no
need to pierce the veil of corporate fiction of respondent. Moreover, the Court notes the pendency of
a separate suit for absorption or regularization of NASECO employees filed by petitioner and NEMU-
PEMA against PNB and respondent, docketed as NLRC NCR Case No. 06-03944-96), which is still on
appeal with the National Labor Relations Commission (NLRC), as per manifestation by respondent. In
the said case, petitioner submitted for resolution by the labor tribunal the issues of whether PNB is
the employer of NASECOs work force and whether NASECO is a labor-only contractor.[29]
WHEREFORE, the petition is PARTLY GRANTED. The Decision dated May 27, 2004 and
Resolution dated September 22, 2004 in CA-G.R. SP No. 76667 are herebyREVERSED and SET
ASIDE as to the order to remand the case to the Secretary of Labor for introduction of supporting
evidence. Accordingly, the Orders of the Secretary of Labor dated January 15, 2003 and March 11,
2003 are REINSTATED and UPHELD.No costs.SO ORDERED.
SECOND DIVISION
Labor Relation Set VI * CBA Cases* Page 20 of 63
G.R. No. 200746, August 06, 2014
BENSON INDUSTRIES EMPLOYEES UNION-ALU-TUCP AND/OR VILMA GENON, EDISA
HORTELANO, LOURDES ARANAS, TONY FORMENTERA, RENEBOY LEYSON, MA. ALONA
ACALDO, MA. CONCEPCION ABAO, TERESITA CALINAWAN, NICIFORO CABANSAG, STELLA
BARONGO, MARILYN POTOT, WELMER ABANID, LORENZO ALIA, LINO PARADERO,
DIOSDADO ANDALES, LUCENA ABESIA, AND ARMANDO YBAÑEZ, Petitioners, v. BENSON
INDUSTRIES, INC., Respondent.
DECISION
PERLAS-BERNABE, J.:
Before the Court is a petition for review on certiorari1 assailing the Decision2 dated September 27,
2011 and the Resolution3 dated January 31, 2012 of the Court of Appeals (CA) in CA-G.R. SP No.
03842 which reversed and set aside the Decision4 dated October 24, 2008 of the Voluntary Arbitrator
(VA) of the National Conciliation and Mediation Board (NCMB), and accordingly deleted the award to
petitioners Vilma Genon, Edisa Hortelano, Lourdes Aranas, Tony Formentera, Reneboy Leyson, Ma.
Alona Acaldo, Ma. Concepcion Abao, Teresita Calinawan, Niciforo Cabansag, Stella Barongo, Marilyn
Potot, Welmer Abanid, Lorenzo Alia, Lino Paradero, Diosdado Andales, Lucena Abesia, and Armando
Ybañez (petitioners) of additional separation pay equivalent to four (4) days of work for every year of
service.
The Facts
Respondent Benson Industries, Inc. (Benson) is a domestic corporation engaged in the manufacturing
of green coils with the brand name Lion-Tiger Mosquito Killer. On February 12, 2008, Benson sent its
employees, including herein petitioners, a notice5 informing them of their intended termination from
employment, to be effected on March 15, 2008 on the ground of closure and/or cessation of business
operations. In consequence, the majority of Benson’s employees resigned.6 Meanwhile, petitioners,
through Benson Industries Employees Union-ALU-TUCP (Union), filed a notice of strike, claiming that
the company’s supposed closure was merely a ploy to replace the union members with lower paid
workers, and, as a result, increase its profit at their expense.7 The strike did not, however, push
through due to the parties’ amicable settlement during the conciliation proceedings before the NCMB,
whereby petitioners accepted Benson’s payment of separation pay, computed at 15 days for every
year of service, as per the parties’ Memorandum of Agreement8 dated April 9, 2008.9cralawred
This notwithstanding, petitioners proffered a claim for the payment of additional separation pay at the
rate of four (4) days for every year of service. As basis, petitioners invoked Section 1, Article VIII of
the existing collective bargaining agreement (CBA) executed by and between the Union and Benson
which states that “[Benson] shall pay to any employee/laborer who is terminated from the service
without any fault attributable to him, a ‘Separation Pay’ equivalent to not less than nineteen (19)
days’ pay for every year of service based upon the latest rate of pay of the employee/laborer
concerned.”10 Benson opposed petitioners’ claim, averring that the separation pay already paid to
them was already more than what the law requires. Reaching an impasse on the conflict, the parties
referred the issue to voluntary arbitration, wherein the validity of Benson’s closure was brought up as
well.11cralawred
The VA Ruling
In a Decision12 dated October 24, 2008 (October 24, 2008 VA Decision), the VA ruled in favor of

petitioners, and, thus, ordered Benson to pay each of them separation benefits in “an amount
equivalent to four (4) days for every year of service based on the latest rate of pay of the [individual
petitioner] concerned subject to whatever legally valid deductions chargeable against [said individual
petitioner] whenever applicable.”13cralawred
The VA ratiocinated that in computing the amount of separation benefits due to petitioners, the basis
should be the provision of the existing CBA between Benson and the Union which explicitly states that
should the employees be terminated through no fault of their own, they should be awarded separation
benefits at the rate of 19 days for every year of service. In this regard, the VA opined that the
provisions of the CBA should be given effect because it expresses the latest agreement of the union
and the company, not to mention the fact that it gives more benefits to the employees.14cralawred
Separately, the VA found adequate proof to support Benson’s position that it was indeed in a state of
insolvency, which, therefore, justified its closure and/or cessation of business operations on the
ground of serious business losses and/or financial reverses.15cralawred
Dissatisfied, Benson elevated the matter on appeal before the CA.
The CA Ruling
In a Decision16 dated September 27, 2011, the CA reversed and set aside the VA’s ruling, and
accordingly deleted the award of additional separation benefits equivalent to four (4) days of work for
every year of service. It held that despite the express provision in the CBA stating that Benson should
pay its employees who were terminated without their fault separation benefits equivalent to at least
19 days’ pay for every year of service, Benson cannot be compelled to do so considering its current
financial status.17cralawred
Aggrieved, petitioners moved for reconsideration, which was, however, denied by the CA in a
Resolution18 dated January 31, 2012, hence, this petition.
The Issue Before the Court
The sole issue for the Court’s resolution is whether or not the CA correctly deleted the award to
petitioners of additional separation benefits equivalent to four (4) days of work for every year of
service.
The Court’s Ruling
The petition is impressed with merit.
Closure of business may be considered as a reversal of an employer’s fortune whereby there is a
complete cessation of business operations and/or an actual locking-up of the doors of the
establishment, usually due to financial losses. Under the Labor Code, it is treated as an authorized
cause for termination, aimed at preventing further financial drain upon an employer who cannot
anymore pay its employees since business has already stopped. As a form of recompense, the
employer is required to pay its employees separation benefits, except when the closure is due to
Labor Relation Set VI * CBA Cases* Page 21 of 63
serious business losses.19 Article 297 (formerly Article 283)20 of the Labor Code, as amended, states
this rule:chanRoblesvirtualLawlibrary
Art. 297. Closure of Establishment and Reduction of Personnel. The employer may also terminate the
employment of any employee due to the installation of labor-saving devices, redundancy,
retrenchment to prevent losses or the closing or cessation of operation of the establishment or
undertaking unless the closing is for the purpose of circumventing the provisions of this Title, x x x. In
case of retrenchment to prevent losses and in cases of closures or cessation of operations of
establishment or undertaking not due to serious business losses or financial reverses, the separation
pay shall be equivalent to one (1) month pay or at least one-half (½) month pay for every year of
service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole
year. (Emphasis and underscoring supplied)
While serious business losses generally exempt the employer from paying separation benefits, it must
be pointed that the exemption only pertains to the obligation of the employer under Article 297 of the
Labor Code. This is because of the law’s express parameter that mandates payment of separation
benefits “in case of closures or cessation of operations of establishment or undertakingnot due to
serious business losses or financial reverses.” The policy distinction underlying Article 297 – that is,
the distinction between closures due to serious business losses and those which are not – was deftly
discussed by the Court in the case of Cama v. Joni’s Food Services, Inc.,21 as
follows:chanRoblesvirtualLawlibrary
The Constitution, while affording full protection to labor, nonetheless, recognizes “the right of
enterprises to reasonable returns on investments, and to expansion and growth.” In line with this
protection afforded to business by the fundamental law, Article 283 [(now, Article 297)] of the Labor
Code clearly makes a policy distinction. It is only in instances of “retrenchment to prevent losses and
in cases of closures or cessation of operations of establishment or undertaking not due to serious
business losses or financial reverses” that employees whose employment has been terminated as a
result are entitled to separation pay. In other words, Article 283 [(now, Article 297)] of the Labor
Code does not obligate an employer to pay separation benefits when the closure is due to serious
losses. To require an employer to be generous when it is no longer in a position to do so, in our view,
would be unduly oppressive, unjust, and unfair to the employer. Ours is a system of laws, and the
law in protecting the rights of the working man, authorizes neither the oppression nor the self-
destruction of the employer. x x x.22 (Emphasis supplied)
When the obligation to pay separation benefits, however, is not sourced from law (particularly, Article
297 of the Labor Code), but from contract,23 such as an existing collective bargaining agreement
between the employer and its employees, an examination of the latter’s provisions becomes
necessary in order to determine the governing parameters for the said obligation. To reiterate, an
employer which closes shop due to serious business losses is exempt from paying separation benefits
under Article 297 of the Labor Code for the reason that the said provision explicitly requires the same
only when the closure is not due to serious business losses; conversely, the obligation is maintained
when the employer’s closure is not due to serious business losses. For a similar exemption to obtain
against a contract, such as a CBA, the tenor of the parties’ agreement ought to be similar to the law’s
tenor. When the parties, however, agree to deviate therefrom, and unqualifiedly covenant the
payment of separation benefits irrespective of the employer’s financial position, then the obligatory
force of that contract prevails and its terms should be carried out to its full effect. Verily, it is

fundamental that obligations arising from contracts have the force of law between the contracting
parties and thus should be complied with in good faith;24 and parties are bound by the stipulations,
clauses, terms and conditions they have agreed to, the only limitation being that these stipulations,
clauses, terms and conditions are not contrary to law, morals, public order or public policy. 25 Hence, if
the terms of a CBA are clear and there is no doubt as to the intention of the contracting parties, the
literal meaning of its stipulations shall prevail.26 As enunciated in Honda Phils., Inc. v. Samahan ng
Malayang Manggagawa sa Honda:27cralawred
A collective bargaining agreement refers to the negotiated contract between a legitimate labor
organization and the employer concerning wages, hours of work and all other terms and conditions of
employment in a bargaining unit. As in all contracts, the parties in a CBA may establish such
stipulations, clauses, terms and conditions as they may deem convenient provided these are not
contrary to law, morals, good customs, public order or public policy. Thus, where the CBA is clear and
unambiguous, it becomes the law between the parties and compliance therewith is mandated by the
express policy of the law.28
In this case, it is undisputed that a CBA was forged by the employer, Benson, and its employees,
through the Union, to govern their relations effective July 1, 2005 to June 30, 2010. It is equally
undisputed that Benson agreed to and was thus obligated under the CBA to pay its employees who
had been terminated without any fault attributable to them separation benefits at the rate of 19 days
for every year of service. This is particularly found in Section 1, Article VIII of the same contract, to
wit:chanRoblesvirtualLawlibrary
Section 1. Separation Pay – The Company shall pay to any employee/laborer who is terminated from
the service without any fault attributable to him, a “Separation Pay” equivalent to not less than
nineteen (19) days’ pay for every year of service based upon the latest rate of pay of the
employee/laborer concerned.29chanrobleslaw
As may be gleaned from the following whereas clauses in a Memorandum of Agreement30 dated
November 20, 2003 between the parties, Benson had been fully aware of its distressed financial
condition even at the time of the previous CBA (effective from July 1, 2000 to June 30,
2005):chanRoblesvirtualLawlibrary
WHEREAS, on February 01, 2001 the Company and the Union entered into a Collective Bargaining
Agreement (CBA) with effectivity from July 01, 2000 to June 30, 2005;chanroblesvirtuallawlibrary
xxxx
WHEREAS, the Company and the Union recognize that the Philippines is at present in grave economic
crisis;chanroblesvirtuallawlibrary
WHEREAS, the Union recognizes and acknowledges that the Company in particular is in grave
financial difficulties and that the Company is hard up to meet its financial obligations to creditor banks
that said creditor banks have even threatened to foreclose the mortgages on and to seize the
Company’s factory, realties, machineries and assets and in fact, the Bank of the Philippine Islands,
one of the creditor banks scheduled on November 17, 1998 a foreclosure sale of the Company’s
factory, realties, machineries and assets in Extrajudicial Foreclosure Case No. EJF-2773-
Labor Relation Set VI * CBA Cases* Page 22 of 63
CEB;chanroblesvirtuallawlibrary
x x x x (Emphases supplied)
Benson even admits in its Comment that it was already saddled with loan from banks as early as
199731 and that it had been unable to service its loan obligations.32 And yet, nothing appears on
record to discount the fact that it still unqualifiedly and freely agreed to the separation pay provision
in the July 1, 2005 to June 30, 2010 CBA, its distressed financial condition notwithstanding.
Thus, in view of the foregoing, the Court disagrees with the CA in negating Benson’s obligation to pay
petitioners their full separation benefits under the said agreement. The postulation that Benson had
closed its establishment and ceased operations due to serious business losses cannot be accepted as
an excuse to clear itself of any liability since the ground of serious business losses is not, unlike
Article 297 of the Labor Code, considered as an exculpatory parameter under the aforementioned
CBA. Clearly, Benson, with full knowledge of its financial situation, freely and voluntarily entered into
such agreement with petitioners. Hence, having failed to show that the subject CBA provision on
separation benefits is contrary to law, morals, public order or public policy, or that the same can be
interpreted as one with a condition – for instance, that the parties actually contemplated non-
payment of separation benefits in the event of closure due to serious business losses – the Court is
constrained to reinstate the October 24, 2008 VA Decision ordering Benson to pay each of the
petitioners separation benefits in “an amount equivalent to four (4) days for every year of service
based on the latest rate of pay of the [individual petitioner] concerned, subject to whatever legally
valid deductions chargeable against [said individual petitioner], whenever applicable.” 33cralawred
Analogous to the foregoing is the Court’s disquisition in Lepanto Ceramics, Inc. v. Lepanto Ceramics
Employees Association,34 whereby the employer therein was held liable for the payment of Christmas
bonus benefits, considering that the grant thereof was voluntarily and unqualifiedly agreed upon by
the parties under the CBA despite the employer’s full awareness of its distressed financial position (as
Benson in this case), viz.:chanRoblesvirtualLawlibrary
It is a familiar and fundamental doctrine in labor law that the CBA is the law between the parties and
they are obliged to comply with its provisions. This principle stands strong and true in the case at
bar.
A reading of the provision of the CBA reveals that the same provides for the giving of a “Christmas
gift package/bonus” without qualification. Terse and clear, the said provision did not state that the
Christmas package shall be made to depend on the petitioner’s financial standing. The records are
also bereft of any showing that the petitioner made it clear during the CBA negotiations that the
bonus was dependent on any condition. Indeed, if the petitioner and respondent Association intended
that the P3,000.00 bonus would be dependent on the company earnings, such intention should have
been expressed in the CBA.
It is noteworthy that in petitioner’s 1998 and 1999 financial Statements, it took note that “the 1997
financial crisis in the Asian region adversely affected the Philippine economy.”
From the foregoing, petitioner cannot insist on business losses as a basis for disregarding its
undertaking. It is manifestly clear that petitioner was very much aware of the imminence and

possibility of business losses owing to the 1997 financial crisis. In 1998, petitioner suffered a net loss
of P14,347,548.00. Yet it gave a P3,000.00 bonus to the members of the Association. In 1999, when
petitioner’s very own financial statement reflected that “the positive developments in the economy
have yet to favorably affect the operations of the company,” and reported a loss of P346,025,733.00,
it entered into the CBA with the respondent Association whereby it contracted to grant a Christmas
gift package/bonus to the latter. Petitioner supposedly continued to incur losses on the years 2000
and 2001. Still and all, this did not deter it from honoring the CBA provision on Christmas bonus as it
continued to give P3,000.00 each to the members of the respondent Association in the years 1999,
2000 and 2001.
All given, business losses are a feeble ground for petitioner to repudiate its obligation under the CBA.
The rule is settled that any benefit and supplement being enjoyed by the employees cannot be
reduced, diminished, discontinued or eliminated by the employer. The principle of non-diminution of
benefits is founded on the constitutional mandate to protect the rights of workers and to promote
their welfare and to afford labor full protection.
Hence, absent any proof that petitioner’s consent was vitiated by fraud, mistake or duress, it is
presumed that it entered into the CBA voluntarily and had full knowledge of the contents thereof and
was aware of its commitments under the contract.35(Emphases and underscoring supplied; citations
omitted)
A similar disposition was also made in the case of Eastern Telecommunications Philippines, Inc. v.
Eastern Telecoms Employees Union,36 wherein the Court held as follows:chanRoblesvirtualLawlibrary
The parties to the contract must be presumed to have assumed the risks of unfavorable
developments. It is, therefore, only in absolutely exceptional changes of circumstances that equity
demands assistance for the debtor. In the case at bench, the Court determines that ETPI’s claimed
depressed financial state will not release it from the binding effect of the 2001-2004 CBA Side
Agreement.
ETPI appears to be well aware of its deteriorating financial condition when it entered into the 2001-
2004 CBA Side Agreement with ETEU and obliged itself to pay bonuses to the members of ETEU.
Considering that ETPI had been continuously suffering huge losses from 2000 to 2002, its business
losses in the year 2003 were not exactly unforeseen or unexpected. Consequently, it cannot be said
that the difficulty in complying with its obligation under the Side Agreement was “manifestly beyond
the contemplation of the parties.” Besides, as held in Central Bank of the Philippines v. Court of
Appeals, mere pecuniary inability to fulfill an engagement does not discharge a contractual obligation.
Contracts, once perfected, are binding between the contracting parties. Obligations arising therefrom
have the force of law and should be complied with in good faith. ETPI cannot renege from the
obligation it has freely assumed when it signed the 2001-2004 CBA Side Agreement.37(Emphases and
underscoring supplied; citations omitted)
To quell any doubts, it bears pointing out that the CA’s reliance on Galaxie Steel Workers Union
(GSWU-NAFLU-KMU) v. NLRC38 and Cama v. Joni’s Food Services, Inc.39 was actually misplaced since
no CBA was involved in those cases. As such, consistent with the parameters of Article 297 of the
Labor Code as above-discussed, the payment of separation benefits in view of the employer’s serious
business losses in those cases was not in order. In the same light, North Davao Mining Corporation v.
Labor Relation Set VI * CBA Cases* Page 23 of 63
NLRC40 was speciously applied by the CA given that the payment of separation benefits in that case
was not sourced from a contractual CBA obligation but merely from a unilateral company practice
which was deemed as an act of generosity on the part of the employer. It was in this context that the
Court held that “to require [the company] to continue being generous when it is no longer in a
position to do so would certainly be unduly oppressive, unfair and most revolting to the
conscience.”41 The factual dissimilarity of these cases to Benson and petitioners’ situation therefore
precludes the application of the same ruling.
Accordingly, finding no cogent reason for Benson not to comply with its obligations under the July 1,
2005 to June 30, 2010 CBA, and considering further that the interpretation of any law or provision
affecting labor should be interpreted in favor of labor,42 the Court hereby reverses the CA Decision
and reinstates the October 24, 2008 VA Decision.
WHEREFORE, the petition is GRANTED. The Decision dated September 27, 2011 and the Resolution
dated January 31, 2012 of the Court of Appeals in CA-G.R. SP No. 03842 are
hereby REVERSED andSET ASIDE. The Decision dated October 24, 2008 of the Voluntary Arbitrator of
the National Conciliation and Mediation Board is REINSTATED.SO ORDERED.
SECOND DIVISION
LEPANTO CERAMICS, INC., G.R. No. 180866
Petitioner,
- versus -
LEPANTO CERAMICS EMPLOYEES
ASSOCIATION, Promulgated:
Respondent.
March 2, 2010
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
PEREZ, J.:
Before this Court is a Petition for Review on Certiorari under Rule 45[1] of the 1997 Rules of
Civil Procedure filed by petitioner Lepanto Ceramics, Inc. (petitioner), assailing the: (1) Decision[2] of
the Court of Appeals, dated 5 April 2006, in CA-G.R. SP No. 78334 which affirmed in toto the decision
of the Voluntary Arbitrator[3] granting the members of the respondent association a Christmas Bonus
in the amount of Three Thousand Pesos (P3,000.00), or the balance of Two Thousand Four Hundred
Pesos (P2,400.00) for the year 2002, and the (2) Resolution[4] of the same court dated 13 December
2007 denying Petitioners Motion for Reconsideration.
The facts are:
Petitioner Lepanto Ceramics, Incorporated is a duly organized corporation existing and
operating by virtue of Philippine Laws. Its business is primarily to manufacture, make, buy and sell,
on wholesale basis, among others, tiles, marbles, mosaics and other similar products.[5]

Respondent Lepanto Ceramics Employees Association (respondent Association) is a
legitimate labor organization duly registered with the Department of Labor and Employment. It is the
sole and exclusive bargaining agent in the establishment of petitioner.[6]
In December 1998, petitioner gave a P3,000.00 bonus to its employees, members of the
respondent Association.[7]
Subsequently, in September 1999, petitioner and respondent Association entered into a
Collective Bargaining Agreement (CBA) which provides for, among others, the grant of a Christmas
gift package/bonus to the members of the respondent Association.[8] The Christmas bonus was one of
the enumerated existing benefit, practice of traditional rights which shall remain in full force and
effect.
The text reads:
Section 8. All other existing benefits, practice of traditional rights
consisting of Christmas Gift package/bonus, reimbursement of transportation
expenses in case of breakdown of service vehicle and medical services and safety
devices by virtue of company policies by the UNION and employees shall remain in
full force and effect.
Section 1. EFFECTIVITY
This agreement shall become effective on September 1, 1999 and shall remain in
full force and effect without change for a period of four (4) years or up to August 31,
2004except as to the representation aspect which shall be effective for a period of five (5)
years. It shall bind each and every employee in the bargaining unit including the present and
future officers of the Union.
In the succeeding years, 1999, 2000 and 2001, the bonus was not in cash. Instead,
petitioner gave each of the members of respondent Association Tile Redemption Certificates
equivalent to P3,000.00.[9] The bonus for the year 2002 is the root of the present dispute. Petitioner
gave a year-end cash benefit of Six Hundred Pesos (P600.00) and offered a cash advance to
interested employees equivalent to one (1) month salary payable in one year.[10] The respondent
Association objected to the P600.00 cash benefit and argued that this was in violation of the CBA it
executed with the petitioner.
The parties failed to amicably settle the dispute. The respondent Association filed a Notice of
Strike with the National Conciliation Mediation Board, Regional Branch No. IV, alleging the violation of
the CBA. The case was placed under preventive mediation. The efforts to conciliate failed. The case
was then referred to the Voluntary Arbitrator for resolution where the Complaint was docketed as
Case No. LAG-PM-12-095-02.
In support of its claim, respondent Association insisted that it has been the traditional practice of the
company to grant its members Christmas bonuses during the end of the calendar year, each in the
amount of P3,000.00 as an expression of gratitude to the employees for their participation in the
companys continued existence in the market. The bonus was either in cash or in the form of company
tiles. In 2002, in a speech during the Christmas celebration, one of the companys top executives
Labor Relation Set VI * CBA Cases* Page 24 of 63
assured the employees of said bonus. However, the Human Resources Development Manager
informed them that the traditional bonus would not be given as the companys earnings were intended
for the payment of its bank loans. Respondent Association argued that this was in violation of their
CBA.
The petitioner averred that the complaint for nonpayment of the 2002 Christmas bonus had
no basis as the same was not a demandable and enforceable obligation. It argued that the giving of
extra compensation was based on the companys available resources for a given year and the workers
are not entitled to a bonus if the company does not make profits. Petitioner adverted to the fact that
it was debt-ridden having incurred net losses for the years 2001 and 2002 totaling to P1.5 billion; and
since 1999, when the CBA was signed, the companys accumulated losses amounted to over P2.7
billion. Petitioner further argued that the grant of a one (1) month salary cash advance was not
meant to take the place of a bonus but was meant to show the companys sincere desire to help its
employees despite its precarious financial condition. Petitioner also averred that the CBA provision on
a Christmas gift/bonus refers to alternative benefits. Finally, petitioner emphasized that even if the
CBA contained an unconditional obligation to grant the bonus to the respondent Association, the
present difficult economic times had already legally released it therefrom pursuant to Article 1267 of
the Civil Code.[11]
The Voluntary Arbitrator rendered a Decision dated 2 June 2003, declaring that petitioner is
bound to grant each of its workers a Christmas bonus of P3,000.00 for the reason that the bonus was
given prior to the effectivity of the CBA between the parties and that the financial losses of the
company is not a sufficient reason to exempt it from granting the same. It stressed that the CBA is a
binding contract and constitutes the law between the parties. The Voluntary Arbitrator further
expounded that since the employees had already been given P600.00 cash bonus, the same should be
deducted from the claimed amount of P3,000.00, thus leaving a balance of P2,400.00. The dispositive
portion of the decision states, viz:
Wherefore, in view of the foregoing respondent LCI is hereby ordered to
pay the members of the complainant union LCEA their respective Christmas bonus
in the amount of three thousand (P3,000.00) pesos for the year 2002 less
the P600.00 already given or a balance of P2,400.00.[12]
Petitioner sought reconsideration but the same was denied by the Voluntary Arbitrator in an
Order dated 27 June 2003, in this wise:
The Motion for Reconsideration filed by the respondent in the above-
entitled case which was received by the Undersigned on June 26, 2003 is hereby
denied pursuant to Section 7 Rule XIX on Grievance Machinery and Voluntary
Arbitration; Amending The Implementing Rules of Book V of the Labor Code of the
Philippines; to wit:
Section 7. Finality of Award/Decision − The decision, order,
resolution or award of the voluntary arbitrator or panel of voluntary
arbitrators shall be final and executory after ten (10) calendar days from

receipt of the copy of the award or decision by the parties and it shall not
be subject of a motion for reconsideration.[13]
Petitioner elevated the case to the Court of Appeals via a Petition for Certiorari under Rule 65
of the Rules of Court docketed as CA-G.R. SP No. 78334.[14] As adverted to earlier, the Court of
Appeals affirmed in toto the decision of the Voluntary Arbitrator. The appellate court also denied
petitioners motion for reconsideration.
In affirming respondent Associations right to the Christmas bonus, the Court of Appeals held:
In the case at bar, it is indubitable that petitioner offered private respondent a
Christmas bonus/gift in 1998 or before the execution of the 1999 CBA which incorporated
the said benefit as a traditional right of the employees. Hence, the grant of said bonus to
private respondent can be deemed a practice as the same has not been given only in the
1999 CBA. Apparently, this is the reason why petitioner specifically recognized the grant of a
Christmas bonus/gift as a practice or tradition as stated in the CBA. x x x.
xxxx
Evidently, the argument of petitioner that the giving of a Christmas bonus is a
management prerogative holds no water. There were no conditions specified in the CBA for
the grant of said benefit contrary to the claim of petitioner that the same is justified only
when there are profits earned by the company. As can be gleaned from the CBA, the
payment of Christmas bonus was not contingent upon the realization of profits. It does not
state that if the company derives no profits, there are no bonuses to be given to the
employees. In fine, the payment thereof was not related to the profitability of business
operations.
Moreover, it is undisputed that petitioner, aside from giving the mandated
13th month pay, has further been giving its employees an additional Christmas bonus at the
end of the year since 1998 or before the effectivity of the CBA in September 1999. Clearly,
the grant of Christmas bonus from 1998 up to 2001, which brought about the filing of the
complaint for alleged non-payment of the 2002 Christmas bonus does not involve the
exercise of management prerogative as the same was given continuously on or about
Christmas time pursuant to the CBA.Consequently, the giving of said bonus can no longer be
withdrawn by the petitioner as this would amount to a diminution of the employees existing
benefits.[15]
Not to be dissuaded, petitioner is now before this Court. The only issue before us is whether
or not the Court of Appeals erred in affirming the ruling of the voluntary arbitrator that the petitioner
is obliged to give the members of the respondent Association a Christmas bonus in the amount
of P3,000.00 in 2002.[16]
We uphold the rulings of the voluntary arbitrator and of the Court of Appeals. Findings of
labor officials, who are deemed to have acquired expertise in matters within their respective
jurisdictions, are generally accorded not only respect but even finality, and bind us when supported
Labor Relation Set VI * CBA Cases* Page 25 of 63
by substantial evidence. This is the rule particularly where the findings of both the arbitrator and the
Court of Appeals coincide.[17]
As a general proposition, an arbitrator is confined to the interpretation and application of the
CBA. He does not sit to dispense his own brand of industrial justice: his award is legitimate only in so
far as it draws its essence from the CBA.[18] That was done in this case.
By definition, a bonus is a gratuity or act of liberality of the giver. It is something given in
addition to what is ordinarily received by or strictly due the recipient. A bonus is granted and paid to
an employee for his industry and loyalty which contributed to the success of the employers business
and made possible the realization of profits.[19]
A bonus is also granted by an enlightened employer to spur the employee to greater efforts
for the success of the business and realization of bigger profits.[20]
Generally, a bonus is not a demandable and enforceable obligation. For a bonus to be
enforceable, it must have been promised by the employer and expressly agreed upon by the
parties.[21] Given that the bonus in this case is integrated in the CBA, the same partakes the nature of
a demandable obligation. Verily, by virtue of its incorporation in the CBA, the Christmas bonus due to
respondent Association has become more than just an act of generosity on the part of the petitioner
but a contractual obligation it has undertaken.[22]
A CBA refers to a negotiated contract between a legitimate labor organization and the employer,
concerning wages, hours of work and all other terms and conditions of employment in a bargaining
unit. As in all other contracts, the parties to a CBA may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided these are not contrary to law, morals, good
customs, public order or public policy.[23]
It is a familiar and fundamental doctrine in labor law that the CBA is the law between the
parties and they are obliged to comply with its provisions.[24] This principle stands strong and true in
the case at bar.
A reading of the provision of the CBA reveals that the same provides for the giving of a
Christmas gift package/bonus without qualification. Terse and clear, the said provision did not state
that the Christmas package shall be made to depend on the petitioners financial standing. The records
are also bereft of any showing that the petitioner made it clear during CBA negotiations that the
bonus was dependent on any condition. Indeed, if the petitioner and respondent Association intended
that the P3,000.00 bonus would be dependent on the company earnings, such intention should have
been expressed in the CBA.
It is noteworthy that in petitioners 1998 and 1999 Financial Statements, it took note that the
1997 financial crisis in the Asian region adversely affected the Philippine economy.[25]
From the foregoing, petitioner cannot insist on business losses as a basis for disregarding its
undertaking. It is manifestly clear that petitioner was very much aware of the imminence and
possibility of business losses owing to the 1997 financial crisis. In 1998, petitioner suffered a net loss
of P14,347,548.00.[26] Yet it gave a P3,000.00 bonus to the members of the respondent Association.
In 1999, when petitioners very own financial statement reflected that the positive developments in

the economy have yet to favorably affect the operations of the company,[27] and reported a loss
of P346,025,733.00,[28] it entered into the CBA with the respondent Association whereby it contracted
to grant a Christmas gift package/bonus to the latter. Petitioner supposedly continued to incur losses
in the years 2000[29] and 2001. Still and all, this did not deter it from honoring the CBA provision on
Christmas bonus as it continued to give P3,000.00 each to the members of the respondent
Association in the years 1999, 2000 and 2001.
All given, business losses are a feeble ground for petitioner to repudiate its obligation under
the CBA. The rule is settled that any benefit and supplement being enjoyed by the employees cannot
be reduced, diminished, discontinued or eliminated by the employer. The principle of non-diminution
of benefits is founded on the constitutional mandate to protect the rights of workers and to promote
their welfare and to afford labor full protection.[30]
Hence, absent any proof that petitioners consent was vitiated by fraud, mistake or duress, it
is presumed that it entered into the CBA voluntarily and had full knowledge of the contents thereof
and was aware of its commitments under the contract.
The Court is fully aware that implementation to the letter of the subject CBA provision may
further deplete petitioners resources. Petitioners remedy though lies not in the Courts invalidation of
the provision but in the parties clarification of the same in subsequent CBA negotiations. Article 253 of
the Labor Code is relevant:
Art. 253. Duty to bargain collectively when there exists a collective
bargaining agreement. - When there is a collective bargaining agreement, the duty
to bargain collectively shall also mean that neither party shall terminate nor modify
such agreement during its lifetime. However, either party can serve a written notice
to terminate or modify the agreement at least sixty (60) days prior to its expiration
date. It shall be the duty of both parties to keep the status quo and to continue in
full force and effect the terms and conditions of the existing agreement during the
sixty (60)-day period and/or until a new agreement is reached by the parties.
WHEREFORE, Premises considered, the petition is DENIED for lack of merit. The Decision of
the Court of Appeals dated 5 April 2006 and the Resolution of the same court dated 13 December
2007 in CA-G.R. SP No. 78334 are AFFIRMED.SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 175492 February 27, 2013
CARLOS L. OCTAVIO, Petitioner,
vs.
PIDLIPPINE LONG DISTANCE TELEPHONE COMPANY, Respondent.
DECISION
DEL CASTILLO, J.:
Every Collective Bargaining Agreement (CBA) shall provide a grievance machinery to which all
disputes arising from its implementation or interpretation will be subjected to compulsory
Labor Relation Set VI * CBA Cases* Page 26 of 63
negotiations. This essential feature of a CBA provides the parties with a simple, inexpensive and
expedient system of finding reasonable and acceptable solutions to disputes and helps in the
attainment of a sound and stable industrial peace.
Before us is a Petition for Review on Certiorari1 assailing the August 31, 2006 Decision2 of the Court of
Appeals (CA) in CA-G.R. SP No. 93578, which dismissed petitioner Carlos L. Octavio's (Octavio)
Petition for Certiorari3assailing the September 30, 2005 Resolution4 of the National Labor Relations
Commission (NLRC). Said NLRC Resolution affirmed the August 30, 2004 Decision5 of the Labor
Arbiter which dismissed Octavio's Complaint for payment of salary increases against respondent
Philippine Long Distance Company (PLDT). Likewise assailed in this Petition is the November 15, 2006
Resolution6 which denied Octavio’s Motion for Reconsideration.7
Factual Antecedents
On May 28, 1999, PLDT and Gabay ng Unyon sa Telekominaksyon ng mga Superbisor (GUTS) entered
into a CBA covering the period January 1, 1999 to December 31, 2001 (CBA of 1999-2001). Article
VI, Section I thereof provides:
Section 1. The COMPANY agrees to grant the following across-theboard salary increase during the
three years covered by this Agreement to all employees covered by the bargaining unit as of the
given dates:
Effective January 1, 1999 – 10% of basic wage or P2,000.00 whichever is higher;
Effective January 1, 2000 – 11% of basic wage or P2,250.00 whichever is higher;
Effective January 1, 2001 – 12% of basic wage or P2,500.00 whichever is higher.8
On October 1, 2000, PLDT hired Octavio as Sales System Analyst I on a probationary status. He
became a member of GUTS. When Octavio was regularized on January 1, 2001, he was receiving a
monthly basic salary ofP10,000.00. On February 1, 2002, he was promoted to the position of Sales
System Analyst 2 and his salary was increased to P13,730.00.
On May 31, 2002, PLDT and GUTS entered into another CBA covering the period January 1, 2002 to
December 31, 2004 (CBA of 2002-2004) which provided for the following salary increases: 8% of
basic wage or P2,000.00 whichever is higher for the first year (2002); 10% of basic wage
or P2,700.00 whichever is higher for the second year (2003); and, 10% of basic wage or P2,400.00
whichever is higher for the third year (2004).9
Claiming that he was not given the salary increases of P2,500.00 effective January 1, 2001
and P2,000.00 effective January 1, 2002, Octavio wrote the President of GUTS, Adolfo Fajardo
(Fajardo).10 Acting thereon and on similar grievances from other GUTS members, Fajardo wrote the
PLDT Human Resource Head to inform management of the GUTS members’ claim for entitlement to
the across-the-board salary increases.11
 Labor Relation Set VI * CBA Cases* Page 27 of 63

Accordingly, the Grievance Committee convened on October 7, 2002 consisting of representatives Aggrieved, Octavio filed before the Arbitration Branch of the NLRC a Complaint for payment of said
from PLDT and GUTS. The Grievance Committee, however, failed to reach an agreement. In effect, it salary increases.
denied Octavio’s demand for salary increases. The Resolution (Committee Resolution), reads as
follows:
Ruling of the Labor Arbiter
October 7, 2002
UNION ISSUE :
1. Mr. Carlos L. Octavio, Sales System Analyst I, CCIM-Database, was promoted to S2 from Octavio claimed entitlement to salary increases per the CBAs of 1999-2001 and 2002-2004. He
S1 last February 01, 2002. He claimed that the whole P2,000 (1st yr. GUTS-CBA increase) insisted that when he was regularized as a supervisory employee on January 1, 2001, he became
was not given to him. entitled to receive the across-the-board increase of P2,500.00 as provided for under the CBA of 1999-
2. He was hired as a probationary employee on October 01, 2000 and was regularized on 2001 which took effect on January 1, 1999. Then pursuant to the CBA of 2002-2004, he should have
January 01, 2001. He claimed that Management failed to grant him the GUTS-CBA increase received an additional increase of P2,000.00 apart from the merit increase of P3,730.00 which was
last January 2001. given him due to his promotion on February 1, 2002. However, PLDT unilaterally decided to deem as
MANAGEMENT POSITION : included in the said P3,730.00 the P2,000.00 across-the-board increase for 2002 as stipulated in the
Issue # 1: CBA of 2002-2004. This, according to Octavio, amounts to diminution of benefits. Moreover, Octavio
A) Promotional Policy: adjustment of basic monthly salary to the minimum salary of the new averred that the CBA cannot be the subject of further negotiation as it has the force of law between
position. the parties. Finally, Octavio claimed that PLDT committed an act of unfair labor practice because,
B) Mr. Octavio’s salary at the time of his promotion and before the conclusion of the GUTS while it granted the claim for salary increase of 18 supervisory employees who were regularized on
CBA was P10,000.00. January 1, 2002 and onwards, it discriminated against him by refusing to grant him the same salary
C) Upon the effectivity of his promotion on February 1, 2002, his basic monthly salary was increase. He thus prayed for an additional award of damages and attorney’s fees.
adjusted to P13,730.00, the minimum salary of the new position.
D) In June 2002, the GUTS-CBA was concluded and Mr. Octavio’s basic salary was PLDT countered that the issues advanced by Octavio had already been resolved by the Union-
recomputed to include the P2,000.00 1st year increase retroactive January 2002. The Management Grievance Committee when it denied his claims through the Committee Resolution.
resulting basic salary was P12,000.00. Moreover, the grant of across-the board salary increase for those who were regularized starting
E) Applying the above-mentioned policy, Mr. Octavio’s basic salary was adjusted to the January 1, 2002 and the exclusion thereto of those who were regularized on January 1, 2001, do not
minimum salary of the new position, which is P13,730.00. constitute an act of unfair labor practice as would result in any discrimination or encourage or
Issue # 2: discourage membership in a labor organization. In fact, when the Union-Management Grievance
All regularized supervisory employees as of January 1 are not entitled to the GUTS CBA increase. Committee came up with the Committee Resolution, they considered the same as the most
However, as agreed with GUTS in the grievance case of 18 personnel of International & Luzon Core practicable and reasonable solution for both management and union. At any rate, the said Committee
Network Management Center, probationary employees who were hired outside of PLDT and Resolution had already become final and conclusive between the parties for failure of Octavio to
regularized as supervisors/management personnel on January 1, 2002 shall be entitled to GUTS CBA. elevate the same to the proper forum. In addition, PLDT claimed that the NLRC has no jurisdiction to
This decision shall be applied prospectively and all previous similar cases are not covered. hear and decide Octavio’s claims.
RESOLUTION :
After protracted deliberation of these issues, the committee failed to reach an agreement. Hence,
Management position deemed adopted. In a Decision dated August 30, 2004, the Labor Arbiter dismissed the Complaint of Octavio and
upheld the Committee Resolution.
MANAGEMENT UNION
Ruling of the National Labor Relations Commission
_______(signed)_______ _______(signed)_______
WILFREDO A. GUADIA ADOLFO L.FAJARDO Upon Octavio’s appeal, the NLRC, in its September 30, 2005 Resolution, affirmed the Labor Arbiter’s
Decision. It upheld the Labor Arbiter’s finding that Octavio’s salary had already been adjusted in
accordance with the provisions of the CBA. The NLRC further ruled that it has no jurisdiction to decide
_______(signed)_______ _______(signed)_______ the issues presented by Octavio, as the same involved the interpretation and implementation of the
ROSALINDA S. RUIZ CONFESOR A. ESPIRITU CBA. According to it, Octavio should have brought his claim before the proper body as provided in the
2002-2004 CBA’s provision on grievance machinery and procedure.
_______(signed)_______ _______(signed)_______
ALEJANDRO C. FABIAN CHARLITO A. AREVALO12

Octavio’s Motion for Reconsideration was likewise dismissed by the NLRC in its November 21, 2005
Resolution.13
Ruling of the Court of Appeals
Octavio thus filed a Petition for Certiorari14 which the CA found to be without merit. In its August 31,
2006 Decision,15 the CA declared the Committee Resolution to be binding on Octavio, he being a
member of GUTS, and because he failed to question its validity and enforceability.
In his Motion for Reconsideration, Octavio disclaimed his alleged failure to question the Committee
16
Resolution by emphasizing that he filed a Complaint before the NLRC against PLDT. However, the CA
denied Octavio’s Motion for Reconsideration in its November 15, 2006 Resolution.17
Issues
Hence, Octavio filed this Petition raising the following issues for our consideration:
a. Whether x x x the employer and bargaining representative may amend the provisions of
the collective bargaining agreement without the consent and approval of the employees;
b. If so, whether the said agreement is binding [on] the employees;
c. Whether x x x merit increases may be awarded simultaneously with increases given in the
Collective Bargaining Agreement;
d. Whether x x x damages may be awarded to the employee for violation by the employer of
its commitment under its existing collective bargaining agreement.18
Octavio submits that the CA erred in upholding the Committee Resolution which denied his claim for
salary increases but granted the same request of 18 other similarly situated employees. He likewise
asserts that both PLDT and GUTS had the duty to strictly implement the CBA salary increases; hence,
the Committee Resolution, which effectively resulted in the modification of the CBAs’ provision on
salary increases, is void.
Octavio also insists that PLDT is bound to grant him the salary increase of P2,000.00 for the year
2002 on top of the merit increase given to him by reason of his promotion. It is his stance that merit
increases are distinct and separate from across-the-board salary increases provided for under the
CBA.
Our Ruling
The Petition has no merit.
Labor Relation Set VI * CBA Cases* Page 28 of 63
Under Article 26019 of the Labor Code, grievances arising from the interpretation or implementation of
the parties’ CBA should be resolved in accordance with the grievance procedure embodied therein. It
also provides that all unsettled grievances shall be automatically referred for voluntary arbitration as
prescribed in the CBA.
In its Memorandum,20 PLDT set forth the grievance machinery and procedure provided under Article X
of the CBA of 2002-2004, viz:
Section 1. GRIEVANCE MACHINERY - there shall be a Union-Management Grievance Committee
composed of three (3) Union representatives designated by the UNION Board of Directors and three
(3) Management representatives designated by the company President. The committee shall act upon
any grievance properly processed in accordance with the prescribed procedure. The Union
representatives to the Committee shall not lose pay for attending meetings where Management
representatives are in attendance.
Section 2. GRIEVANCE PROCEDURE - The parties agree that all disputes between labor and
management may be settled through friendly negotiations; that the parties have the same interest in
the continuity of work until all points in dispute shall have been discussed and settled; that an open
conflict in any form involves losses to the parties; and that therefore, every effort shall be exerted to
avoid such an open conflict. In furtherance of these principles, the parties agree to observe the
following grievance procedures.
Step 1. Any employee (or group of employees) who believes that he has a justifiable grievance shall
present the matter initially to his division head, or if the division is involved in the grievance, to the
company official next higher to the division head (the local manager in the provincial exchanges) not
later that fifteen (15) days after the occurrence of the incident giving rise to the grievance. The initial
presentation shall be made to the division head either by the aggrieved party himself or by the Union
Steward or by any Executive Officer of the Union who is not a member of the grievance
panel.1âwphi1 The initial presentation may be made orally or in writing.
Step 2. Any party who is not satisfied with the resolution of the grievance at Step 1 may appeal in
writing to the Union-Management Grievance Committee within seven (7) days from the date of
receipt of the department head’s decision.
Step 3. If the grievance is not settled either because of deadlock or the failure of the committee to
decide the matter, the grievance shall be transferred to a Board of Arbitrators for the final
decision. The Board shall be composed of three (3) arbitrators, one to be nominated by the Union,
another to be nominated by the Management, and the third to be selected by the management and
union nominees. The decision of the board shall be final and binding both the company and the Union
in accordance with law. Expenses of arbitration shall be divided equally between the Company and the
Union.21 (Emphasis supplied)
Indisputably, the present controversy involves the determination of an employee’s salary increases as
provided in the CBAs. When Octavio’s claim for salary increases was referred to the Union-

Management Grievance Committee, the clear intention of the parties was to resolve their differences
on the proper interpretation and implementation of the pertinent provisions of the CBAs. And in
accordance with the procedure prescribed therein, the said committee made up of representatives of
both the union and the management convened. Unfortunately, it failed to reach an agreement.
Octavio’s recourse pursuant to the CBA was to elevate his grievance to the Board of Arbitrators for
final decision. Instead, nine months later, Octavio filed a Complaint before the NLRC.
It is settled that "when parties have validly agreed on a procedure for resolving grievances and to
submit a dispute to voluntary arbitration then that procedure should be strictly
observed."22 Moreover, we have held time and again that "before a party is allowed to seek the
intervention of the court, it is a precondition that he should have availed of all the means of
administrative processes afforded him. Hence, if a remedy within the administrative machinery can
still be resorted to by giving the administrative officer concerned every opportunity to decide on a
matter that comes within his jurisdiction, then such remedy should be exhausted first before the
court’s judicial power can be sought. The premature invocation of the court’s judicial intervention is
fatal to one’s cause of action."23 "The underlying principle of the rule on exhaustion of administrative
remedies rests on the presumption that when the administrative body, or grievance machinery, is
afforded a chance to pass upon the matter, it will decide the same correctly."24
By failing to question the Committee Resolution through the proper procedure prescribed in the CBA,
that is, by raising the same before a Board of Arbitrators, Octavio is deemed to have waived his right
to question the same. Clearly, he departed from the grievance procedure mandated in the CBA and
denied the Board of Arbitrators the opportunity to pass upon a matter over which it has jurisdiction.
Hence, and as correctly held by the CA, Octavio’s failure to assail the validity and enforceability of the
Committee Resolution makes the same binding upon him. On this score alone, Octavio’s recourse to
the labor tribunals below, as well as to the CA, and, finally, to this Court, must therefore fail.
At any rate, Octavio cannot claim that the Committee Resolution is not valid, binding and conclusive
as to him for being a modification of the CBA in violation of Article 25325 of the Labor Code. It bears
to stress that the said resolution is a product of the grievance procedure outlined in the CBA itself. It
was arrived at after the management and the union through their respective representatives
conducted negotiations in accordance with the CBA. On the other hand, Octavio never assailed the
competence of the grievance committee to take cognizance of his case. Neither did he question the
authority or credibility of the union representatives; hence, the latter are deemed to have properly
bargained on his behalf since "unions are the agent of its members for the purpose of securing just
and fair wages and good working conditions."26 In fine, it cannot be gainsaid that the Committee
Resolution is a modification of the CBA. Rather, it only provides for the proper implementation of the
CBA provision respecting salary increases.
Finally, Octavio’s argument that the denial of his claim for salary increases constitutes a violation of
Article 10027of the Labor Code is devoid of merit. Even assuming that there has been a diminution of
benefits on his part, Article 100 does not prohibit a union from offering and agreeing to reduce wages
and benefits of the employees as the right to free collective bargaining includes the right to suspend
it.28 PLDT averred that one of the reasons why Octavio’s salary was recomputed as to include in his
salary of P13,730.00 the P2,000.00 increase for 2002 is to avoid salary distortion. At this point, it is
well to emphasize that bargaining should not be equated to an "adversarial litigation where rights and
Labor Relation Set VI * CBA Cases* Page 29 of 63
obligations are delineated and remedies applied."29 Instead, it covers a process of finding a
reasonable and acceptable solution to stabilize labor-management relations to promote stable
industrial peace.30 Clearly, the Committee Resolution was arrived at after considering the intention of
both PLDT and GUTS to foster industrial peace.
All told, we find no error on the part of the Labor Arbiter, the NLRC and the CA in unanimously
upholding the validity and enforceability of the Grievance Committee Resolution dated October 7,
2002.
WHEREFORE, the petition is DENIED. The August 31, 2006 Decision and November 15, 2006
Resolution of the Court of Appeals in CA-G.R. SP No. 93578 are AFFIRMED.SO ORDERED
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 181806 March 12, 2014
WESLEYAN UNIVERSITY-PHILIPPINES, Petitioner,
vs.
WESLEYAN UNIVERSITY-PHILIPPINES FACULTY and STAFF ASSOCIATION, Respondent.
DECISION
DEL CASTILLO, J.:
A Collective Bargaining Agreement (CBA) is a contract entered into by an employer and a legitimate
labor organization concerning the terms and conditions of employment.1 Like any other contract, it
has the force of law between the parties and, thus, should be complied with in good faith.2 Unilateral
changes or suspensions in the implementation of the provisions of the CBA, therefore, cannot be
allowed without the consent of both parties.
This Petition for Review on Certiorari3 under Rule 45 of the Rules of Court assails the September 25,
2007 Decision4 and the February 5, 2008 Resolution5 of the Court of Appeals (CA) in CA-G.R. SP No.
97053.
Factual Antecedents
Petitioner Wesleyan University-Philippines is a non-stock, non-profit educational institution duly
organized and existing under the laws of the Philippines.6 Respondent Wesleyan University-Philippines
Faculty and Staff Association, on the other hand, is a duly registered labor organization 7 acting as the
sole and exclusive bargaining agent of all rank-and-file faculty and staff employees of petitioner.8
In December 2003, the parties signed a 5-year CBA9 effective June 1, 2003 until May 31, 2008.10
On August 16, 2005, petitioner, through its President, Atty. Guillermo T. Maglaya (Atty. Maglaya),
issued a Memorandum11 providing guidelines on the implementation of vacation and sick leave credits
as well as vacation leave commutation. The pertinent portions of the Memorandum read:
1. VACATION AND SICK LEAVE CREDITS
 Labor Relation Set VI * CBA Cases* Page 30 of 63

Vacation and sick leave credits are not automatic. They have to be earned. Monthly, a Association (PERAA) Plan and another from the CBA Retirement Plan. Sections 1, 2, 3 and 4 of Article
qualified employee earns an equivalent of 1.25 days credit each for VL and SL. Vacation XVI of the CBA provide:
Leave and Sick Leave credits of 15 days become complete at the cut off date of May 31 of
each year. (Example, only a total of 5 days credit will be given to an employee for each of
ARTICLE XVI
sick leave [or] vacation leave, as of month end September, that is, 4 months from June to
SEPARATION, DISABILITY AND RETIREMENT PAY
September multiplied by 1.25 days). An employee, therefore, who takes VL or SL beyond his
leave credits as of date will have to file leave without pay for leaves beyond his credit.
SECTION 1. ELIGIBILITY FOR MEMBERSHIP - Membership in the Plan shall be automatic for all full-
time, regular staff and tenured faculty of the University, except the University President. Membership
2. VACATION LEAVE COMMUTATION
in the Plan shall commence on the first day of the month coincident with or next following his
statement of Regular/Tenured Employment Status.
Only vacation leave is commuted or monetized to cash. Vacation leave commutation is
effected after the second year of continuous service of an employee. Hence, an employee
SECTION 2. COMPULSORY RETIREMENT DATE - The compulsory retirement date of each Member shall
who started working June 1, 2005 will get his commutation on May 31, 2007 or thereabout.12
be as follows:

On August 25, 2005, respondent’s President, Cynthia L. De Lara (De Lara) wrote a letter13 to Atty.
a. Faculty – The last day of the School Year, coincident with his attainment of age sixty (60)
Maglaya informing him that respondent is not amenable to the unilateral changes made by
with at least five (years) of unbroken, credited service.
petitioner.14 De Lara questioned the guidelines for being violative of existing practices and the
CBA,15 specifically Sections 1 and 2, Article XII of the CBA, to wit:
b. Staff – Upon reaching the age of sixty (60) with at least five (5) years of unbroken,
credited service.
ARTICLE XII
VACATION LEAVE AND SICK LEAVE
SECTION 3. OPTIONAL RETIREMENT DATE - A Member may opt for an optional retirement prior to his
compulsory retirement. His number of years of service in the University shall be the basis of
SECTION 1. VACATION LEAVE - All regular and non-tenured rank-and-file faculty and staff who are
computing x x x his retirement benefits regardless of his chronological age.
entitled to receive shall enjoy fifteen (15) days vacation leave with pay annually.

SECTION 4. RETIREMENT BENEFIT - The retirement benefit shall be a sum equivalent to 100% of the
1.1 All unused vacation leave after the second year of service shall be converted into cash and be
member’s final monthly salary for compulsory retirement.
paid to the entitled employee at the end of each school year to be given not later than August 30 of
each year.
For optional retirement, the vesting schedule shall be:
x x x x19
SECTION 2. SICK LEAVE - All regular and non-tenured rank-and-file faculty and staff shall enjoy
fifteen (15) days sick leave with pay annually.16
On November 2, 2006, the Voluntary Arbitrator rendered a Decision20 declaring the one-retirement
policy and the Memorandum dated August 16, 2005 contrary to law. The dispositive portion of the
On February 8, 2006, a Labor Management Committee (LMC) Meeting was held during which Decision reads:
petitioner advised respondent to file a grievance complaint on the implementation of the vacation and
sick leave policy.17 In the same meeting, petitioner announced its plan of implementing a one-
WHEREFORE, the following award is hereby made:
retirement policy,18 which was unacceptable to respondent.

1. The assailed University guidelines on the availment of vacation and sick leave credits and vacation
Ruling of the Voluntary Arbitrator
leave commutation are contrary to law. The University is consequently ordered to reinstate the earlier
scheme, practice or policy in effect before the issuance of the said guidelines on August 16, 2005;
Unable to settle their differences at the grievance level, the parties referred the matter to a Voluntary
Arbitrator. During the hearing, respondent submitted affidavits to prove that there is an established
2. The "one retirement" policy is contrary to law and is hereby revoked and rescinded. The University
practice of giving two retirement benefits, one from the Private Education Retirement Annuity
is ordered x x x to resume and proceed with the established practice of extending to qualified
employees retirement benefits under both the CBA and the PERAA Plan.

3. The other money claims are denied.21
Ruling of the Court of Appeals
Aggrieved, petitioner appealed the case to the CA via a Petition for Review under Rule 43 of the Rules
of Court.
On September 25, 2007, the CA rendered a Decision22 finding the rulings of the Voluntary Arbitrator
supported by substantial evidence. It also affirmed the nullification of the one-retirement policy and
the Memorandum dated August 16, 2005 on the ground that these unilaterally amended the CBA
without the consent of respondent.23Thus:
WHEREFORE, the instant appeal is DISMISSED for lack of merit.SO ORDERED.24
Petitioner moved for reconsideration but the same was denied by the CA in its February 5, 2008
Resolution.25
Issues
Hence, this recourse by petitioner raising the following issues:
a.
Whether x x x the [CA] committed grave and palpable error in sustaining the Voluntary Arbitrator’s
ruling that the Affidavits submitted by Respondent WU-PFSA are substantial evidence as defined by
the rules and jurisprudence that would substantiate that Petitioner WU-P has long been in the practice
of granting its employees two (2) sets of Retirement Benefits.
b.
Whether x x x the [CA] committed grave and palpable error in sustaining the Voluntary Arbitrator’s
ruling that a university practice of granting its employees two (2) sets of Retirement Benefits had
already been established as defined by the law and jurisprudence especially in light of the illegality
and lack of authority of such alleged grant.
c.
Whether x x x the [CA] committed grave and palpable error in sustaining the Voluntary Arbitrator’s
ruling that it is incumbent upon Petitioner WU-P to show proof that no Board Resolution was issued
granting two (2) sets of Retirement Benefits.
d.
Whether x x x the [CA] committed grave and palpable error in revoking the 16 August 2005
Memorandum of Petitioner WU-P for being contrary to extant policy.26
Petitioner’s Arguments
Petitioner argues that there is only one retirement plan as the CBA Retirement Plan and the PERAA
Plan are one and the same.27 It maintains that there is no established company practice or policy of
giving two retirement benefits to its employees.28 Assuming, without admitting, that two retirement
benefits were released,29 petitioner insists that these were done by mere oversight or mistake as
there is no Board Resolution authorizing their release.30 And since these benefits are unauthorized
and irregular, these cannot ripen into a company practice or policy.31 As to the affidavits submitted by
Labor Relation Set VI * CBA Cases* Page 31 of 63
respondent, petitioner claims that these are self-serving declarations,32and thus, should not be given
weight and credence.33
In addition, petitioner claims that the Memorandum dated August 16, 2005, which provides for the
guidelines on the implementation of vacation and sick leave credits as well as vacation leave
commutation, is valid because it is in full accord with existing policy.34
Respondent’s Arguments
Respondent belies the claims of petitioner and asserts that there are two retirement plans as the
PERAA Retirement Plan, which has been implemented for more than 30 years, is different from the
CBA Retirement Plan.35 Respondent further avers that it has always been a practice of petitioner to
give two retirement benefits36and that this practice was established by substantial evidence as found
by both the Voluntary Arbitrator and the CA.37
As to the Memorandum dated August 16, 2005, respondent asserts that it is arbitrary and contrary to
the CBA and existing practices as it added qualifications or limitations which were not agreed upon by
the parties.38
Our Ruling
The Petition is bereft of merit.
The Non-Diminution Rule found in Article 10039 of the Labor Code explicitly prohibits employers from
eliminating or reducing the benefits received by their employees. This rule, however, applies only if
the benefit is based on an express policy, a written contract, or has ripened into a practice.40 To be
considered a practice, it must be consistently and deliberately made by the employer over a long
period of time.41
An exception to the rule is when "the practice is due to error in the construction or application of a
doubtful or difficult question of law."42 The error, however, must be corrected immediately after its
discovery;43 otherwise, the rule on Non-Diminution of Benefits would still apply.
The practice of giving two retirement
benefits to petitioner’s employees is
supported by substantial evidence.
In this case, respondent was able to present substantial evidence in the form of affidavits to support
its claim that there are two retirement plans. Based on the affidavits, petitioner has been giving two
retirement benefits as early as 1997.44 Petitioner, on the other hand, failed to present any evidence to
refute the veracity of these affidavits. Petitioner’s contention that these affidavits are self-serving
holds no water. The retired employees of petitioner have nothing to lose or gain in this case as they
have already received their retirement benefits. Thus, they have no reason to perjure themselves.
 Labor Relation Set VI * CBA Cases* Page 32 of 63

Obviously, the only reason they executed those affidavits is to bring out the truth. As we see it then, months of the school year or from June to September, an employee is only entitled to five days
their affidavits, corroborated by the affidavits of incumbent employees, are more than sufficient to vacation leave and five days sick leave.46 Considering that the Memorandum dated August 16, 2005
show that the granting of two retirement benefits to retiring employees had already ripened into a imposes a limitation not agreed upon by the parties nor stated in the CBA, we agree with the CA that
consistent and deliberate practice. it must be struck down.

Moreover, petitioner’s assertion that there is only one retirement plan as the CBA Retirement Plan and In closing, it may not be amiss to mention that when the provision of the CBA is clear, leaving no
the PERAA Plan are one and the same is not supported by any evidence. There is nothing in Article doubt on the intention of the parties, the literal meaning of the stipulation shall govem.47
XVI of the CBA to indicate or even suggest that the "Plan" referred to in the CBA is the PERAA Plan.
Besides, any doubt in the interpretation of the provisions of the CBA should be resolved in favor of
However, if there is doubt in its interpretation, it should be resolved in favor of labor,48 as this is
respondent. In fact, petitioner’s assertion is negated by the announcement it made during the LMC
mandated by no less than the Constitution.49
Meeting on February 8, 2006 regarding its plan of implementing a "one-retirement plan." For if it
were true that petitioner was already implementing a one-retirement policy, there would have been
no need for such announcement. Equally damaging is the letter-memorandum45dated May 11, 2006, WHEREFORE, the Petition is hereby DENIED. The assailed September 25, 2007 Decision and the
entitled "Suggestions on the defenses we can introduce to justify the abolition of double retirement February 5, 2008 Resolution of the Court of Appeals in CA-G.R. SP No. 97053 are hereby
policy," prepared by the petitioner’s legal counsel. AFFIRMED.SO ORDERED.

These circumstances, taken together, bolster the finding that the two-retirement policy is a Republic of the Philippines
practice.1âwphi1 Thus, petitioner cannot, without the consent of respondent, eliminate the two- SUPREME COURT
retirement policy and implement a one-retirement policy as this would violate the rule on non- Manila
diminution of benefits. SECOND DIVISION
G.R. No. 176249 November 27, 2009
FVC LABOR UNION-PHILIPPINE TRANSPORT AND GENERAL WORKERS ORGANIZATION
As a last ditch effort to abolish the two-retirement policy, petitioner contends that such practice is
(FVCLU-PTGWO), Petitioner,
illegal or unauthorized and that the benefits were erroneously given by the previous administration.
vs.
No evidence, however, was presented by petitioner to substantiate its allegations.
SAMA-SAMANG NAGKAKAISANG MANGGAGAWA SA FVC-SOLIDARITY OF INDEPENDENT
AND GENERAL LABOR ORGANIZATIONS (SANAMA-FVC-SIGLO), Respondent.
Considering the foregoing disquisition, we agree with the findings of the Voluntary Arbitrator, as DECISION
affirmed by the CA, that there is substantial evidence to prove that there is an existing practice of BRION, J.:
giving two retirement benefits, one under the PERAA Plan and another under the CBA Retirement
Plan. We pass upon the petition for review on certiorari under Rule 45 of the Rules of Court1 filed by FVC
Labor Union–Philippine Transport and General Workers Organization (FVCLU-PTGWO) to challenge the
Court of Appeals’ (CA) decision of July 25, 20062 and its resolution rendered on January 15, 20073 in
The Memorandum dated August 16,
C.A. G.R. SP No. 83292.4
2005 is contrary to the existing CBA.

THE ANTECEDENTS
Neither do we find any reason to disturb the findings of the CA that the Memorandum dated August
16, 2005 is contrary to the existing CBA.
The facts are undisputed and are summarized below.
Sections 1 and 2 of Article XII of the CBA provide that all covered employees are entitled to 15 days
sick leave and 15 days vacation leave with pay every year and that after the second year of service, On December 22, 1997, the petitioner FVCLU-PTGWO – the recognized bargaining agent of the rank-
all unused vacation leave shall be converted to cash and paid to the employee at the end of each and-file employees of the FVC Philippines, Incorporated (company) – signed a five-year collective
school year, not later than August 30 of each year. bargaining agreement (CBA) with the company. The five-year CBA period was from February 1, 1998
to January 30, 2003.5 At the end of the 3rd year of the five-year term and pursuant to the CBA,
FVCLU-PTGWO and the company entered into the renegotiation of the CBA and modified, among
The Memorandum dated August 16, 2005, however, states that vacation and sick leave credits are
other provisions, the CBA’s duration. Article XXV, Section 2 of the renegotiated CBA provides that
not automatic as leave credits would be earned on a month-to-month basis. This, in effect, limits the
available leave credits of an employee at the start of the school year. For example, for the first four

"this re-negotiation agreement shall take effect beginning February 1, 2001 and until May 31, 2003"
thus extending the original five-year period of the CBA by four (4) months.
On January 21, 2003, nine (9) days before the January 30, 2003 expiration of the originally-agreed
five-year CBA term (and four [4] months and nine [9] days away from the expiration of the amended
CBA period), the respondent Sama-Samang Nagkakaisang Manggagawa sa FVC-Solidarity of
Independent and General Labor Organizations (SANAMA-SIGLO) filed before the Department of Labor
and Employment (DOLE) a petition for certification election for the same rank-and-file unit covered by
the FVCLU-PTGWO CBA. FVCLU-PTGWO moved to dismiss the petition on the ground that the
certification election petition was filed outside the freedom period or outside of the sixty (60) days
before the expiration of the CBA on May 31, 2003.
Action on the Petition and Related Incidents
On June 17, 2003, Med-Arbiter Arturo V. Cosuco dismissed the petition on the ground that it was filed
outside the 60-day period counted from the May 31, 2003 expiry date of the amended
CBA.6 SANAMA-SIGLO appealed the Med-Arbiter’s Order to the DOLE Secretary, contending that the
filing of the petition on January 21, 2003 was within 60-days from the January 30, 2003 expiration of
the original CBA term.
DOLE Secretary Patricia A. Sto. Tomas sustained SANAMA-SIGLO’s position, thereby setting aside the
decision of the Med-Arbiter.7 She ordered the conduct of a certification election in the company.
FVCLU-PTGWO moved for the reconsideration of the Secretary’s decision.
On November 6, 2003, DOLE Acting Secretary Manuel G. Imson granted the motion; he set aside the
August 6, 2003 DOLE decision and dismissed the petition as the Med-Arbiter’s Order of June 17, 2003
did.8 The Acting Secretary held that the amended CBA (which extended the representation aspect of
the original CBA by four [4] months) had been ratified by members of the bargaining unit some of
whom later organized themselves as SANAMA-SIGLO, the certification election applicant. Since these
SANAMA-SIGLO members fully accepted and in fact received the benefits arising from the
amendments, the Acting Secretary rationalized that they also accepted the extended term of the CBA
and cannot now file a petition for certification election based on the original CBA expiration date.
SANAMA-SIGLO moved for the reconsideration of the Acting Secretary’s Order, but Secretary Sto.
Tomas denied the motion in her Order of January 30, 2004.9
SANAMA-SIGLO sought relief from the CA through a petition for certiorari under Rule 65 of the Rules
of Court based on the grave abuse of discretion the Labor Secretary committed when she reversed
her earlier decision calling for a certification election. SANAMA-SIGLO pointed out that the Secretary’s
new ruling is patently contrary to the express provision of the law and established jurisprudence.
THE CA DECISION
Labor Relation Set VI * CBA Cases* Page 33 of 63
The CA found SANAMA-SIGLO’s petition meritorious on the basis of the applicable law10 and the
rules,11 as interpreted in the congressional debates. It set aside the challenged DOLE Secretary
decisions and reinstated her earlier ruling calling for a certification election. The appellate court
declared:
It is clear from the foregoing that while the parties may renegotiate the other provisions (economic
and non-economic) of the CBA, this should not affect the five-year representation aspect of the
original CBA. If the duration of the renegotiated agreement does not coincide with but rather exceeds
the original five-year term, the same will not adversely affect the right of another union to challenge
the majority status of the incumbent bargaining agent within sixty (60) days before the lapse of the
original five (5) year term of the CBA. In the event a new union wins in the certification election, such
union is required to honor and administer the renegotiated CBA throughout the excess period.
FVCLU-PTGWO moved to reconsider the CA decision but the CA denied the motion in its resolution of
January 15, 2007.12 With this denial, FVCLU-PTGWO now comes before us to challenge the CA
rulings.13 It argues that in light of the peculiar attendant circumstances of the case, the CA erred in
strictly applying Section 11 (11b), Rule XI, Book V of the Omnibus Rules Implementing the Labor
Code, as amended by Department Order No. 9, s. 1997.14
Apparently, the "peculiar circumstances" the FVCLU-PTGWO referred to relate to the economic and
other provisions of the February 1, 1998 to January 30, 2003 CBA that it renegotiated with the
company. The renegotiated CBA changed the CBA’s remaining term from February 1, 2001 to May 31,
2003. To FVCLU-PTGWO, this extension of the CBA term also changed the union’s exclusive
bargaining representation status and effectively moved the reckoning point of the 60-day freedom
period from January 30, 2003 to May 30, 2003. FVCLU-PTGWO thus moved to dismiss the petition for
certification election filed on January 21, 2003 (9 days before the expiry date on January 30, 2003 of
the original CBA) by SANAMA-SIGLO on the ground that the petition was filed outside the authorized
60-day freedom period.
It also submits in its petition that the SANAMA-SIGLO is estopped from questioning the extension of
the CBA term under the amendments because its members are the very same ones who approved the
amendments, including the expiration date of the CBA, and who benefited from these amendments.
Lastly, FVCLU-PTGWO posits that the representation petition had been rendered moot by a new CBA it
entered into with the company covering the period June 1, 2003 to May 31, 2008.151avvphi1
Required to comment by the Court16 and to show cause for its failure to comply,17 SANAMA-SIGLO
manifested on October 10, 2007 that: since the promulgation of the CA decision on July 25, 2006 or
three years after the petition for certification election was filed, the local leaders of SANAMA-SIGLO
had stopped reporting to the federation office or attending meetings of the council of local leaders;
the SANAMA-SIGLO counsel, who is also the SIGLO national president, is no longer in the position to
pursue the present case because the local union and its leadership, who are principals of SIGLO, had
given up and abandoned their desire to contest the representative status of FVCLU-PTGWO; and a
new CBA had already been signed by FVCLU-PTGWO and the company.18Under these circumstances,
SANAMA-SIGLO contends that pursuing the case has become futile, and accordingly simply adopted

the CA decision of July 25, 2006 as its position; its counsel likewise asked to be relieved from filing a
comment in the case. We granted the request for relief and dispensed with the filing of a comment.19
THE COURT’S RULING
While SANAMA-SIGLO has manifested its abandonment of its challenge to the exclusive bargaining
representation status of FVCLU-PTGWO, we deem it necessary in the exercise of our discretion to
resolve the question of law raised since this exclusive representation status issue will inevitably recur
in the future as workplace parties avail of opportunities to prolong workplace harmony by extending
the term of CBAs already in place.20
The legal question before us centers on the effect of the amended or extended term of the CBA on the
exclusive representation status of the collective bargaining agent and the right of another union to
ask for certification as exclusive bargaining agent. The question arises because the law allows a
challenge to the exclusive representation status of a collective bargaining agent through the filing of a
certification election petition only within 60 days from the expiration of the five-year CBA.
Article 253-A of the Labor Code covers this situation and it provides:
Terms of a collective bargaining agreement. – Any Collective Bargaining Agreement that the parties
may enter into, shall, insofar as the representation aspect is concerned, be for a term of five (5)
years. No petition questioning the majority status of the incumbent bargaining agent shall be
entertained and no certification election shall be conducted by the Department of Labor and
Employment outside of the sixty day period immediately before the date of expiry of such five-year
term of the Collective Bargaining Agreement. All other provisions of the Collective Bargaining
Agreement shall be renegotiated not later than three (3) years after its execution.
Any agreement on such other provisions of the Collective Bargaining Agreement entered into within
six (6) months from the date of expiry of the term of such other provisions as fixed in such Collective
Bargaining Agreement, shall retroact to the day immediately following such date. If any such
agreement is entered into beyond six months, the parties shall agree on the duration of retroactivity
thereof. In case of a deadlock in the renegotiation of the collective bargaining agreement, the parties
may exercise their rights under this Code.
This Labor Code provision is implemented through Book V, Rule VIII of the Rules Implementing the
Labor Code21which states:
Sec. 14. Denial of the petition; grounds. – The Med-Arbiter may dismiss the petition on any of the
following grounds:
xxxx
Labor Relation Set VI * CBA Cases* Page 34 of 63
(b) the petition was filed before or after the freedom period of a duly registered collective bargaining
agreement;provided that the sixty-day period based on the original collective bargaining agreement
shall not be affected by any amendment, extension or renewal of the collective bargaining
agreement (underscoring supplied).
xxxx
The root of the controversy can be traced to a misunderstanding of the interaction between a union’s
exclusive bargaining representation status in a CBA and the term or effective period of the CBA.
FVCLU-PTGWO has taken the view that its exclusive representation status should fully be in step with
the term of the CBA and that this status can be challenged only within 60 days before the expiration
of this term. Thus, when the term of the CBA was extended, its exclusive bargaining status was
similarly extended so that the freedom period for the filing of a petition for certification election
should be counted back from the expiration of the amended CBA term.
We hold this FVCLU-PTGWO position to be correct, but only with respect to the original five-year term
of the CBA which, by law, is also the effective period of the union’s exclusive bargaining
representation status. While the parties may agree to extend the CBA’s original five-year term
together with all other CBA provisions, any such amendment or term in excess of five years will not
carry with it a change in the union’s exclusive collective bargaining status. By express provision of the
above-quoted Article 253-A, the exclusive bargaining status cannot go beyond five years and the
representation status is a legal matter not for the workplace parties to agree upon. In other words,
despite an agreement for a CBA with a life of more than five years, either as an original provision or
by amendment, the bargaining union’s exclusive bargaining status is effective only for five years and
can be challenged within sixty (60) days prior to the expiration of the CBA’s first five years. As we
said in San Miguel Corp. Employees Union–PTGWO, et al. v. Confesor, San Miguel Corp., Magnolia
Corp. and San Miguel Foods, Inc.,22 where we cited the Memorandum of the Secretary of Labor and
Employment dated February 24, 1994:
In the event however, that the parties, by mutual agreement, enter into a renegotiated contract with
a term of three (3) years or one which does not coincide with the said five-year term and said
agreement is ratified by majority of the members in the bargaining unit, the subject contract is valid
and legal and therefore, binds the contracting parties. The same will however not adversely affect the
right of another union to challenge the majority status of the incumbent bargaining agent within sixty
(60) days before the lapse of the original five (5) year term of the CBA.
In the present case, the CBA was originally signed for a period of five years, i.e., from February 1,
1998 to January 30, 2003, with a provision for the renegotiation of the CBA’s other provisions at the
end of the 3rd year of the five-year CBA term. Thus, prior to January 30, 2001 the workplace parties
sat down for renegotiation but instead of confining themselves to the economic and non-economic
CBA provisions, also extended the life of the CBA for another four months, i.e., from the original
expiry date on January 30, 2003 to May 30, 2003.

As discussed above, this negotiated extension of the CBA term has no legal effect on the FVCLU-
PTGWO’s exclusive bargaining representation status which remained effective only for five years
ending on the original expiry date of January 30, 2003. Thus, sixty days prior to this date, or starting
December 2, 2002, SANAMA-SIGLO could properly file a petition for certification election. Its petition,
filed on January 21, 2003 or nine (9) days before the expiration of the CBA and of FVCLU-PTGWO’s
exclusive bargaining status, was seasonably filed.
We thus find no error in the appellate court’s ruling reinstating the DOLE order for the conduct of a
certification election. If this ruling cannot now be given effect, the only reason is SANAMA-SIGLO’s
own desistance; we cannot disregard its manifestation that the members of SANAMA themselves are
no longer interested in contesting the exclusive collective bargaining agent status of FVCLU-PTGWO.
This recognition is fully in accord with the Labor Code’s intent to foster industrial peace and harmony
in the workplace.
WHEREFORE, premises considered, we AFFIRM the correctness of the challenged Decision and
Resolution of the Court of Appeals and accordingly DISMISS the petition, but nevertheless DECLARE
that no certification election, pursuant to the underlying petition for certification election filed with the
Department of Labor and Employment, can be enforced as this petition has effectively been
abandoned.SO ORDERED.
Republic of the Philippines
SUPREME COURT
Baguio City
SECOND DIVISION
G.R. No. 185556 March 28, 2011
SUPREME STEEL CORPORATION, Petitioner,
vs.
NAGKAKAISANG MANGGAGAWA NG SUPREME INDEPENDENT UNION (NMS-IND-
APL), Respondent.
DECISION
NACHURA, J.:
This petition for review on certiorari assails the Court of Appeals (CA) Decision1 dated September 30,
2008, and Resolution dated December 4, 2008, which affirmed the finding of the National Labor
Relations Commission (NLRC) that petitioner violated certain provisions of the Collective Bargaining
Agreement (CBA).
Petitioner Supreme Steel Pipe Corporation is a domestic corporation engaged in the business of
manufacturing steel pipes for domestic and foreign markets. Respondent Nagkakaisang Manggagawa
ng Supreme Independent Union is the certified bargaining agent of petitioner’s rank-and-file
employees. The CBA2 in question was executed by the parties to cover the period from June 1, 2003
to May 31, 2008.
The Case
Labor Relation Set VI * CBA Cases* Page 35 of 63
On July 27, 2005, respondent filed a notice of strike with the National Conciliation and Mediation
Board (NCMB) on the ground that petitioner violated certain provisions of the CBA. The parties failed
to settle their dispute. Consequently, the Secretary of Labor certified the case to the NLRC for
compulsory arbitration pursuant to Article 263(g) of the Labor Code.
Respondent alleged eleven CBA violations, delineated as follows:
A. Denial to four employees of the CBA- provided wage increase
Article XII, Section 1 of the CBA provides:
Section 1. The COMPANY shall grant a general wage increase, over and above to all employees,
according to the following schedule:
A. Effective June 1, 2003 P14.00 per working day;
B. Effective June 1, 2004 P12.00 per working day; and
C. Effective June 1, 2005 P12.00 per working day.3
Respondent alleged that petitioner has repeatedly denied the annual CBA increases to at least four
individuals: Juan Niño, Reynaldo Acosta, Rommel Talavera, and Eddie Dalagon. According to
respondent, petitioner gives an anniversary increase to its employees upon reaching their first year of
employment. The four employees received their respective anniversary increases and petitioner used
such anniversary increase to justify the denial of their CBA increase for the year.4
Petitioner explained that it has been the company’s long standing practice that upon reaching one
year of service, a wage adjustment is granted, and, once wages are adjusted, the increase provided
for in the CBA for that year is no longer implemented. Petitioner claimed that this practice was not
objected to by respondent as evidenced by the employees’ pay slips.5
Respondent countered that petitioner failed to prove that, as a matter of company practice, the
anniversary increase took the place of the CBA increase. It contended that all employees should
receive the CBA stipulated increase for the years 2003 to 2005.6
B. Contracting-out labor
Article II, Section 6 of the CBA provides:
Section 6. Prohibition of Contracting Out of Work of Members of Bargaining Unit. Thirty (30) days
from the signing of this CBA, contractual employees in all departments, except Warehouse and
Packing Section, shall be phased out. Those contractual employees who are presently in the workforce
of the COMPANY shall no longer be allowed to work after the expiration of their contracts without
prejudice to being hired as probationary employees of the COMPANY.7

Respondent claimed that, contrary to this provision, petitioner hired temporary workers for five
months based on uniformly worded employment contracts, renewable for five months, and assigned
them to almost all of the
departments in the company. It pointed out that, under the CBA, temporary workers are allowed only
in the Warehouse and Packing Section; consequently, employment of contractual employees outside
this section, whether direct or agency-hired, was absolutely prohibited. Worse, petitioner never
regularized them even if the position they occupied and the services they performed were necessary
and desirable to its business. Upon the expiration of their contracts, these workers would be replaced
with other workers with the same employment status. This scheme is a clear circumvention of the
laws on regular employment. 8
Respondent argued that the right to self-organization goes beyond the maintenance of union
membership. It emphasized that the CBA maintains a union shop clause which gives the regular
employees 30 days within which to join respondent as a condition for their continued employment.
Respondent maintained that petitioner’s persistent refusal to grant regular status to its employees,
such as Dindo Buella, who is assigned in the Galvanizing Department, violates the employees’ right to
self-organization in two ways: (1) they are deprived of a representative for collective bargaining
purposes; and (2) respondent is deprived the right to expand its membership. Respondent contended
that a union’s strength lies in its number, which becomes crucial especially during negotiations; after
all, an employer will not bargain seriously with a union whose membership constitutes a minority of
the total workforce of the company. According to respondent, out of the 500 employees of the
company, only 147 are union members, and at least 60 employees would have been eligible for union
membership had they been recognized as regular employees.9
For its part, petitioner admitted that it hired temporary workers. It purportedly did so to cope with the
seasonal increase of the job orders from abroad. In order to comply with the job orders, petitioner
hired the temporary workers to help the regular workers in the production of steel pipes. Petitioner
maintained that these workers do not affect respondent’s membership. Petitioner claimed that it
agreed to terminate these temporary employees on the condition that the regular employees would
have to perform the work that these employees were performing, but respondent refused.
Respondent’s refusal allegedly proved that petitioner was not contracting out the services being
performed by union members. Finally, petitioner insisted that the hiring of temporary workers is a
management prerogative.10
C. Failure to provide shuttle service
Petitioner has allegedly reneged on its obligation to provide shuttle service for its employees pursuant
to Article XIV, Section 7 of the CBA, which provides:
Section 7. Shuttle Service. As per company practice, once the company vehicle used for the purpose
has been reconditioned.11
Labor Relation Set VI * CBA Cases* Page 36 of 63
Respondent claimed that the company vehicle which would be used as shuttle service for its
employees has not been reconditioned by petitioner since the signing of the CBA on February 26,
2004.12 Petitioner explained that it is difficult to implement this provision and simply denied that it has
reneged on its obligation.13
D. Refusal to answer for the medical expenses incurred by three employees
Respondent asserted that petitioner is liable for the expenses incurred by three employees who were
injured while in the company premises. This liability allegedly stems from Article VIII, Section 4 of the
CBA which provides:
Section 4. The COMPANY agrees to provide first aid medicine and first aid service and consultation
free of charge to all its employees.14
According to respondent, petitioner’s definition of what constitutes first aid service is limited to the
bare minimum of treating injured employees while still within the company premises and referring the
injured employee to the Chinese General Hospital for treatment, but the travel expense in going to
the hospital is charged to the employee. Thus, when Alberto Guevarra and Job Canizares, union
members, were injured, they had to pay P90.00 each for transportation expenses in going to the
hospital for treatment and going back to the company thereafter. In the case of Rodrigo Solitario,
petitioner did not even shoulder the cost of the first aid medicine, amounting toP2,113.00, even if he
was injured during the company sportsfest, but the amount was deducted, instead, from his salary.
Respondent insisted that this violates the above cited provision of the CBA.15
Petitioner insisted that it provided medicine and first aid assistance to Rodrigo Solitario.1avvphi1 It
alleged that the latter cannot claim hospitalization benefits under Article VIII, Section 1 16 of the CBA
because he was not confined in a hospital.17
E. Failure to comply with the time-off with pay provision
Article II, Section 8 of the CBA provides:
Section 8. Time-Off with Pay. The COMPANY shall grant to the UNION’s duly authorized
representative/s or to any employee who are on duty, if summoned by the UNION to testify, if his/her
presence is necessary, a paid time-off for the handling of grievances, cases, investigations, labor-
management conferences provided that if the venue of the case is outside Company premises
involving [the] implementation and interpretation of the CBA, two (2) representatives of the UNION
who will attend the said hearing shall be considered time-off with pay. If an employee on a night shift
attends grievance on labor-related cases and could not report for work due to physical condition, he
may avail of union leave without need of the two (2) days prior notice.18
Respondent contended that under the said provision, petitioner was obliged to grant a paid time-off to
respondent’s duly authorized representative or to any employee who was on duty, when summoned

by respondent to testify or when the employee’s presence was necessary in the grievance hearings,
meetings, or investigations.19
Petitioner admitted that it did not honor the claim for wages of the union officers who attended the
grievance meetings because these meetings were initiated by respondent itself. It argued that since
the union officers
were performing their functions as such, and not as employees of the company, the latter should not
be liable. Petitioner further asserted that it is not liable to pay the wages of the union officers when
the meetings are held beyond company time (3:00 p.m.). It claimed that time-off with pay is allowed
only if the venue of the meeting is outside company premises and the meeting involves the
implementation and interpretation of the CBA.20
In reply, respondent averred that the above quoted provision does not make a qualification that the
meetings should be held during office hours (7:00 a.m. to 3:00 p.m.); hence, for as long as the
presence of the employee is needed, time spent during the grievance meeting should be paid.21
F. Visitors’ free access to company premises Respondent charged petitioner with violation of Article II,
Section 7 of the CBA which provides:
Section 7. Free Access to Company Premises. Local Union and Federation officers (subject to
company’s security measure) shall be allowed during working hours to enter the COMPANY premises
for the following reasons:
a. To investigate grievances that have arisen;
b. To interview Union Officers, Stewards and members during reasonable hours; and
c. To attend to any meeting called by the Management or the UNION.22
G. Failure to comply with reporting time-off provision
Respondent maintained that a brownout is covered by Article XII, Section 3 of the CBA which states:
Section 3. Reporting Time-Off. The employees who have reported for work but are unable to continue
working because of emergencies such as typhoons, flood, earthquake, transportation strike, where
the COMPANY is affected and in case of fire which occurs in the block where the home of the
employee is situated and not just across the street and serious illness of an immediate member of the
family of the employee living with him/her and no one in the house can bring the sick family member
to the hospital, shall be paid as follows:
a. At least half day if the work stoppage occurs within the first four (4) hours of work; and
b. A whole day if the work stoppage occurs after four (4) hours of work.23
Respondent averred that petitioner paid the employees’ salaries for one hour only of the four-hour
brownout that occurred on July 25, 2005 and refused to pay for the remaining three hours. In
defense, petitioner simply insisted that brownouts are not included in the above list of emergencies.24
Labor Relation Set VI * CBA Cases* Page 37 of 63
Respondent rejoined that, under the principle of ejusdem generis, brownouts or power outages come
within the "emergencies" contemplated by the CBA provision. Although brownouts were not
specifically identified as one of the emergencies listed in the said CBA provision, it cannot be denied
that brownouts fall within the same kind or class of the enumerated emergencies. Respondent
maintained that the intention of the provision was to compensate the employees for occurrences
which are beyond their control, and power outage is one of such occurrences. It insisted that the list
of emergencies is not an exhaustive list but merely gives an idea as to what constitutes an actual
emergency that is beyond the control of the employee.25
H. Dismissal of Diosdado Madayag
Diosdado Madayag was employed as welder by petitioner. He was served a Notice of Termination
dated March 14, 2005 which read:
Please consider this as a Notice of Termination of employment effective March 14, 2005 under Art.
284 of the Labor Code and its Implementing Rules.
This is based on the medical certificate submitted by your attending physician, Lucy Anne E. Mamba,
M.D., Jose R. Reyes Memorial Medical Center dated March 7, 2005 with the following diagnosis:
‘Diabetes Mellitus Type 2’
Please be guided accordingly.26
Respondent contended that Madayag’s dismissal from employment is illegal because petitioner failed
to obtain a certification from a competent public authority that his disease is of such nature or at such
stage that it cannot be cured within six months even after proper medical treatment. Petitioner also
failed to prove that Madayag’s continued employment was prejudicial to his health or that of his
colleagues.27
Petitioner, on the other hand, alleged that Madayag was validly terminated under Art. 28428 of the
Labor Code and that his leg was amputated by reason of diabetes, which disease is not work-related.
Petitioner claimed that it was willing to pay Madayag 13 days for every year of service but respondent
was asking for additional benefits.29
I. Denial of paternity leave benefit to two employees
Article XV, Section 2 of the CBA provides:
Section 2. Paternity Leave. As per law[,] [t]he Company shall, as much as possible, pay paternity
leave within 2 weeks from submission of documents.30
Petitioner admitted that it denied this benefit to the claimants for failure to observe the requirement
provided in the Implementing Rules and Regulations of Republic Act No. 8187 (Paternity Leave Act of
 Labor Relation Set VI * CBA Cases* Page 38 of 63

1995), that is, to notify the employer of the pregnancy of their wives and the expected date of Guadaña’s case, Navarro denied that he was being harsh but claimed that he merely wanted to stress
delivery.31 some points. Petitioner explained that Guadaña was transferred when the section where he was
assigned was phased out due to the installation of new machines. Petitioner pointed out that the other
workers assigned in said section were also transferred.37
Respondent argued that petitioner is relying on technicalities by insisting that the denial was due to
the two employees’ failure to notify it of the pregnancy of their respective spouses. It maintained that
the notification requirement runs counter to the spirit of the law. Respondent averred that, on For the petitioner, Emmanuel Mendiola, Production Superintendent, also executed an affidavit
grounds of social justice, the oversight to notify petitioner should not be dealt with severely by attesting that the allegation of Ariel Marigondon, that he was harassed and was a victim of
denying the two claimants this benefit.32 discrimination for being respondent’s President, had no basis. Marigondon pointed out that after the
job order was completed, he was reassigned to his original shift and group.38
J. Discrimination and harassment
Petitioner also submitted the affidavits of Elizabeth Llaneta Aguilar, disbursement clerk and hiring
staff, and Romeo T. Sy, Assistant Personnel Manager. Aguilar explained that she did not mean to
According to respondent, petitioner was contemptuous over union officers for protecting the rights of
harass Masangcay, but she merely wanted to make sure that he would receive his salary. Affiant Sy
union members. In an affidavit executed by Chito Guadaña, union secretary, he narrated that Alfred
admitted that he refused to release Masangcay’s salary to a woman who presented herself as his
Navarro, Officer-in-Charge of the Packing Department, had been harsh in dealing with his fellow
(Masangcay’s) wife since nobody could attest to it. He claimed that such is not an act of harassment
employees and would even challenge some workers to a fight. He averred that Navarro had an
but a precautionary measure to protect Masangcay’s interest.39
overbearing attitude during work and grievance meetings. In November 2004, Navarro removed
Guadaña, a foreman, from his position and installed another foreman from another section. The
action was allegedly brought about by earlier grievances against Navarro’s abuse. Petitioner K. Non-implementation of COLA in Wage Order Nos. RBIII-10 and 11
confirmed his transfer to another section in violation of Article VI, Section 6 of the CBA, 33 which states
in part:
Respondent posited that any form of wage increase granted through the CBA should not be treated as
compliance with the wage increase given through the wage boards. Respondent claimed that, for a
Section 6. Transfer of Employment. – No permanent positional transfer outside can be effected by the number of years, petitioner has complied with Article XII, Section 2 of the CBA which provides:
COMPANY without discussing the grounds before the Grievance Committee. All transfer shall be with
advance notice of two (2) weeks. No transfer shall interfere with the employee’s exercise of the right
Section 2. All salary increase granted by the COMPANY shall not be credited to any future contractual
to self-organization.34
or legislated wage increases. Both increases shall be implemented separate and distinct from the
increases stated in this Agreement. It should be understood by both parties that contractual salary
Respondent also alleged that Ariel Marigondon, union president, was also penalized for working for his increase are separate and distinct from legislated wage increases, thus the increase brought by the
fellow employees. One time, Marigondon inquired from management about matters concerning tax latter shall be enjoyed also by all covered employees.40
discrepancies because it appeared that non-taxable items were included as part of taxable income.
Thereafter, Marigondon was transferred from one area of operation to another until he was allegedly
Respondent maintained that for every wage order that was issued in Region 3, petitioner never
forced to accept menial jobs of putting control tags on steel pipes, a kind of job which did not require
hesitated to comply and grant a similar increase. Specifically, respondent cited petitioner’s compliance
his 16 years of expertise in examining steel pipes.35
with Wage Order No. RBIII-10 and grant of the mandated P15.00 cost of living allowance (COLA) to
all its employees. Petitioner, however, stopped implementing it to non-minimum wage earners on July
Edgardo Masangcay, respondent’s Second Vice President, executed an affidavit wherein he cited three 24, 2005. It contended that this violates Article 100 of the Labor Code which prohibits the diminution
instances when his salary was withheld by petitioner. The first incident happened on May 28, 2005 of benefits already enjoyed by the workers and that such grant of benefits had already ripened into a
when petitioner refused to give his salary to his wife despite presentation of a proof of identification company practice.41
(ID) and letter of authorization. On June 18, 2005, petitioner also refused to release his salary to
Pascual Lazaro despite submission of a letter of authority and his ID and, as a result, he was unable
Petitioner explained that the COLA provided under Wage Order No. RBIII-10 applies to minimum
to buy medicine for his child who was suffering from asthma attack. The third instance happened on
wage earners only and that, by mistake, it implemented the same across the board or to all its
June 25, 2005 when his salary was short of P450.00; this amount was however released the following
employees. After realizing its mistake, it stopped integrating the COLA to the basic pay of the workers
week.36
who were earning above the minimum wage.42

Petitioner explained that the transfer of the employee from one department to another was the result
The NLRC’s Ruling
of downsizing the Warehouse Department, which is a valid exercise of management prerogative. In
 Labor Relation Set VI * CBA Cases* Page 39 of 63

Out of the eleven issues raised by respondent, eight were decided in its favor; two (denial of paternity
17) A. Marigondon - P181.66
leave benefit and discrimination of union members) were decided in favor of petitioner; while the
issue on visitor’s free access to company premises was deemed settled during the mandatory 18) F. Servano - P174.02
conference. The dispositive portion of the NLRC Decision dated March 30, 2007 reads:
19) R. Estrella - P181.50
WHEREFORE, Supreme Steel Pipe Corporation (the Company) is hereby ordered to:
20) A. Marigondon - P181.66
1) implement general wage increase to Juan Niño, Eddie Dalagon and Rommel Talavera
pursuant to the CBA in June 2003, 2004 and 2005; 6) pay workers their salary for the 3 hours of the 4 hour brownout as follows:
2) regularize workers Dindo Buella and 60 other workers and to respect CBA provision on
contracting-out labor;
3) recondition the company vehicle pursuant to the CBA; 1) Alagon, Jr., Pedro - P130.0875
4) answer for expenses involved in providing first aid services including transportation
expenses for this purpose, as well as to reimburse Rodrigo Solitario the sum of P2,113.00; 2) Aliwalas, Cristeto - P108.5625
5) pay wages of union members/officers who attended grievance meetings as follows:
1) D. Serenilla - P115.24375 3) Baltazar, Roderick - P 90.1875

2) D. Miralpes - P115.80625 4) Bañez, Oliver - P 90.9375

3) E. Mallari - P108.7625 5) Prucal, Eduardo - P126.015

4) C. Cruz - P114.65313 6) Calimquin, Rodillo - P131.0362

5) J. Patalbo - P161.0625 7) Clave, Arturo - P125.64

6) J.J. Muñoz - P111.19375 8) Cadavero, Rey - P108.5625

7) C. Guadaña - P56.94375 9) De Leon, Romulo - P124.35

8) J. Patalbo - P161.0625 10) Lactao, Noli - P126.015

9) E. Mallari - P108.7625 11) Layco, Jr., Dandino - P130.5375

10) C. Guadaña - P113.8875 12) Legaspi, Melencio - P127.63

11) A. Marigondon - P170.30625 13) Quiachon, Rogelio - P130.5525

12) A. Marigondon - P181.66 14) Sacmar, Roberto - P108.9375

13) A. Marigondon - P181.66 15) Tagle, Farian - P129.3375

14) E. Masangcay - P175.75 16) Villavicencio, Victor - P126.015

15) A. Marigondon - P181.66 17) Agra, Romale - P126.015

16) E. Masangcay - P175.75 18) Basabe, Luis - P128.5575

 Labor Relation Set VI * CBA Cases* Page 40 of 63

WHEREFORE, premises considered, the present petition is hereby DENIED DUE COURSE and
19) Bornasal, Joel - P127.53
accordingly DISMISSED, for lack of merit. The assailed Decision dated March 30, 2007 and Resolution
dated April 28, 2008 of the National Labor Relations Commission in NLRC NCR CC No. 000305-05 are
20) Casitas, Santiago - P128.5575
hereby AFFIRMED.
21) Celajes, Bonifacio - P128.1825
With costs against the petitioner.SO ORDERED.44
22) Avenido, Jerry - P133.2487

23) Gagarin, Alfredo - P108.9375 According to the CA, petitioner failed to show that the NLRC committed grave abuse of discretion in
finding that it violated certain provisions of the CBA. The NLRC correctly held that every employee is
24) Layson, Paulo - P131.745 entitled to the wage increase under the CBA despite receipt of an anniversary increase. The CA
concluded that, based on the wording of the CBA, which uses the words "general increase" and "over
25) Lledo, Asalem - P128.5575 and above," it cannot be said that the parties have intended the anniversary increase to be given in
lieu of the CBA wage increase.45
26) Marigondon, Ariel - P131.745
The CA declared that the withdrawal of the COLA under Wage Order No. RBIII-10 from the employees
27) Orcena, Sonnie - P126.015 who were not minimum wage earners amounted to a diminution of benefits because such grant has
already ripened into a company practice. It pointed out that there was no ambiguity or doubt as to
28) Servano, Fernando - P126.015
who were covered by the wage order. Petitioner, therefore, may not invoke error or mistake in
extending the COLA to all employees and such act can only be construed as "as a voluntary act on the
29) Versola, Rodrigo - P126.015
part of the employer."46 The CA opined that, considering the foregoing, the ruling in Globe Mackay
Cable and Radio Corp. v. NLRC47 clearly did not apply as there was no doubtful or difficult question
involved in the present case.48
7) reinstate Diosdado Madayag to his former position without loss of seniority rights and to
pay full backwages and other benefits from 14 March 2005, date of dismissal, until the date
of this Decision; if reinstatement is impossible[,] to pay separation pay of one month pay for The CA sustained the NLRC’s interpretation of Art. VIII, Section 4 of the CBA as including the
every year of service in addition to backwages; expenses for first aid medicine and transportation cost in going to the hospital. The CA stressed that
the CBA should be construed liberally rather than narrowly and technically, and the courts must place
a practical and realistic construction upon it, giving due consideration to the context in which it was
8) dismiss the claim for paternity leave for failure of claimants to observe the requirements;
negotiated and the purpose which it intended to serve.49

9) dismiss the charge of harassment and discrimination for lack of merit; and to
Based on the principle of liberal construction of the CBA, the CA likewise sustained the NLRC’s rulings
on the issues pertaining to the shuttle service, time-off for attendance in grievance
10) continue to implement COLA under Wage Order Nos. [RBIII]-10 & 11 across the board. meetings/hearings, and time-off due to brownouts.50

The issue on Visitors’ Free Access to Company Premises is dismissed for being moot and academic
after it was settled during the scheduled conferences.SO ORDERED.43
Forthwith, petitioner elevated the case to the CA, reiterating its arguments on the eight issues
resolved by the NLRC in respondent’s favor.
The CA’s Ruling
On September 30, 2008, the CA rendered a decision dismissing the petition, thus:
The CA further held that management prerogative is not unlimited: it is subject to limitations found in
law, a CBA, or the general principles of fair play and justice. It stressed that the CBA provided such
limitation on management prerogative to contract-out labor, and compliance with the CBA is
mandated by the express policy of the law.51
Finally, the CA affirmed the NLRC’s finding that Madayag’s dismissal was illegal. It emphasized that
the burden to prove that the employee’s disease is of such nature or at such stage that it cannot be
cured within a period of six months rests on the employer. Petitioner failed to submit a certification
from a competent public authority attesting to such fact; hence, Madayag’s dismissal is illegal.52

Petitioner moved for a reconsideration of the CA’s decision. On December 4, 2008, the CA denied the
motion for lack of merit.53
Dissatisfied, petitioner filed this petition for review on certiorari, contending that the CA erred in
finding that it violated certain provisions of the CBA.
The Court’s Ruling
The petition is partly meritorious.
It is a familiar and fundamental doctrine in labor law that the CBA is the law between the parties and
compliance therewith is mandated by the express policy of the law. If the terms of a CBA are clear
and there is no doubt as to the intention of the contracting parties, the literal meaning of its
stipulation shall prevail.54 Moreover, the CBA must be construed liberally rather than narrowly and
technically and the Court must place a practical and realistic construction upon it.55 Any doubt in the
interpretation of any law or provision affecting labor should be resolved in favor of labor.56
Upon these well-established precepts, we sustain the CA’s findings and conclusions on all the issues,
except the issue pertaining to the denial of the COLA under Wage Order No. RBIII-10 and 11 to the
employees who are not minimum wage earners.
The wording of the CBA on general wage increase cannot be interpreted any other way: The CBA
increase should be given to all employees "over and above" the amount they are receiving, even if
that amount already includes an anniversary increase. Stipulations in a contract must be read
together, not in isolation from one another.57Consideration of Article XIII, Section 2 (non-crediting
provision), bolsters such interpretation. Section 2 states that "[a]ll salary increase granted by the
company shall not be credited to any future contractual or legislated wage increases." Clearly then,
even if petitioner had already awarded an anniversary increase to its employees, such increase cannot
be credited to the "contractual" increase as provided in the CBA, which is considered "separate and
distinct."
Petitioner claims that it has been the company practice to offset the anniversary increase with the
CBA increase. It however failed to prove such material fact. Company practice, just like any other
fact, habits, customs, usage or patterns of conduct must be proven. The offering party must allege
and prove specific, repetitive conduct that might constitute evidence of habit,58 or company practice.
Evidently, the pay slips of the four employees do not serve as sufficient proof.
Petitioner’s excuse in not providing a shuttle service to its employees is unacceptable. In fact, it can
hardly be considered as an excuse. Petitioner simply says that it is difficult to implement the
provision. It relies on the fact that "no time element [is] explicitly stated [in the CBA] within which to
fulfill the undertaking." We cannot allow petitioner to dillydally in complying with its obligation and
Labor Relation Set VI * CBA Cases* Page 41 of 63
take undue advantage of the fact that no period is provided in the CBA. Petitioner should recondition
the company vehicle at once, lest it be charged with and found guilty of unfair labor practice.
Petitioner gave a narrow construction to the wording of the CBA when it denied (a) reimbursement for
the first-aid medicines taken by Rodrigo Solitario when he was injured during the company sportsfest
and the transportation cost incurred by Alberto Guevara and Job Canizares in going to the hospital,
(b) payment of the wages of certain employees during the time they spent at the grievance meetings,
and (c) payment of the employees’ wages during the brownout that occurred on July 25, 2002. As
previously stated, the CBA must be construed liberally rather than narrowly and technically. It is the
duty of the courts to place a practical and realistic construction upon the CBA, giving due
consideration to the context in which it is negotiated and the purpose which it is intended to serve.
Absurd and illogical interpretations should be avoided.59 A CBA, like any other contract, must be
interpreted according to the intention of the parties.60
The CA was correct in pointing out that the concerned employees were not seeking hospitalization
benefits under Article VIII, Section 1 of the CBA, but under Section 4 thereof; hence, confinement in a
hospital is not a prerequisite for the claim. Petitioner should reimburse Solitario for the first aid
medicines; after all, it is the duty of the employer to maintain first- aid medicines in its
premises.61 Similarly, Guevara and Canizares should also be reimbursed for the transportation cost
incurred in going to the hospital. The Omnibus Rules Implementing the Labor Code provides that,
where the employer does not have an emergency hospital in its premises, the employer is obliged to
transport an employee to the nearest hospital or clinic in case of emergency.62
We likewise agree with the CA on the issue of nonpayment of the time-off for attending grievance
meetings. The intention of the parties is obviously to compensate the employees for the time that
they spend in a grievance meeting as the CBA provision categorically states that the company will pay
the employee "a paid time-off for handling of grievances, investigations, labor-management
conferences." It does not make a qualification that such meeting should be held during office hours or
within the company premises.
The employees should also be compensated for the time they were prevented from working due to
the brownout. The CBA enumerates some of the instances considered as "emergencies" and these are
"typhoons, flood earthquake, transportation strike." As correctly argued by respondent, the CBA does
not exclusively enumerate the situations which are considered "emergencies." Obviously, the key
element of the provision is that employees "who have reported for work are unable to continue
working" because of the incident. It is therefore reasonable to conclude that brownout or power
outage is considered an "emergency" situation.
Again, on the issue of contracting-out labor, we sustain the CA. Petitioner, in effect, admits having
hired "temporary" employees, but it maintains that it was an exercise of management prerogative,
necessitated by the increase in demand for its product.
Indeed, jurisprudence recognizes the right to exercise management prerogative. Labor laws also
discourage interference with an employer's judgment in the conduct of its business. For this reason,
the Court often declines to interfere in legitimate business decisions of employers. The law must

protect not only the welfare of employees, but also the right of employers.63 However, the exercise of
management prerogative is not unlimited. Managerial prerogatives are subject to limitations provided
by law, collective bargaining agreements, and general principles of fair play and justice.64 The CBA is
the norm of conduct between the parties and, as previously stated, compliance therewith is mandated
by the express policy of the law.65
The CBA is clear in providing that temporary employees will no longer be allowed in the company
except in the Warehouse and Packing Section. Petitioner is bound by this provision. It cannot exempt
itself from compliance by invoking management prerogative. Management prerogative must take a
backseat when faced with a CBA provision. If petitioner needed additional personnel to meet the
increase in demand, it could have taken measures without violating the CBA.
Respondent claims that the temporary employees were hired on five-month contracts, renewable for
another five months. After the expiration of the contracts, petitioner would hire other persons for the
same work, with the same employment status.
Plainly, petitioner’s scheme seeks to prevent employees from acquiring the status of regular
employees. But the Court has already held that, where from the circumstances it is apparent that the
periods of employment have been imposed to preclude acquisition of security of tenure by the
employee, they should be struck down or disregarded as contrary to public policy and morals.66 The
primary standard to determine a regular employment is the reasonable connection between the
particular activity performed by the employee in relation to the business or trade of the employer.
The test is whether the former is usually necessary or desirable in the usual business or trade of the
employer. If the employee has been performing the job for at least one year, even if the performance
is not continuous or merely intermittent, the law deems the repeated and continuing need for its
performance as sufficient evidence of the necessity, if not indispensability, of that activity to the
business of the employer. Hence, the employment is also considered regular, but only with respect to
such activity and while such activity exists.67
We also uphold the CA’s finding that Madayag’s dismissal was illegal. It is already settled that the
burden to prove the validity of the dismissal rests upon the employer. Dismissal based on Article 284
of the Labor Code is no different, thus:
The law is unequivocal: the employer, before it can legally dismiss its employee on the ground of
disease, must adduce a certification from a competent public authority that the disease of which its
employee is suffering is of such nature or at such a stage that it cannot be cured within a period of six
months even with proper treatment.
xxxx
In Triple Eight Integrated Services, Inc. v. NLRC, the Court explains why the submission of the
requisite medical certificate is for the employer’s compliance, thus:
Labor Relation Set VI * CBA Cases* Page 42 of 63
The requirement for a medical certificate under Article 284 of the Labor Code cannot be dispensed
with; otherwise, it would sanction the unilateral and arbitrary determination by the employer of the
gravity or extent of the employee’s illness and thus defeat the public policy on the protection of labor.
x x x x68
However, with respect to the issue of whether the COLA under Wage Order Nos. RBIII-10 and 11
should be implemented across the board, we hold a different view from that of the CA. No diminution
of benefits would result if the wage orders are not implemented across the board, as no such
company practice has been established.
Diminution of benefits is the unilateral withdrawal by the employer of benefits already enjoyed by the
employees. There is diminution of benefits when it is shown that: (1) the grant or benefit is founded
on a policy or has ripened into a practice over a long period of time; (2) the practice is consistent and
deliberate; (3) the practice is not due to error in the construction or application of a doubtful or
difficult question of law; and (4) the diminution or discontinuance is done unilaterally by the
employer.69
To recall, the CA arrived at its ruling by relying on the fact that there was no ambiguity in the wording
of the wage order as to the employees covered by it. From this, the CA concluded that petitioner
actually made no error or mistake, but acted voluntarily, in granting the COLA to all its employees. It
therefore took exception to the Globe Mackay case which, according to it, applies only when there is a
doubtful or difficult question involved.
The CA failed to note that Globe Mackay primarily emphasized that, for the grant of the benefit to be
considered voluntary, "it should have been practiced over a long period of time, and must be shown
to have been consistent and deliberate."70 The fact that the practice must not have been due to error
in the construction or application of a doubtful or difficult question of law is a distinct requirement.
The implementation of the COLA under Wage Order No. RBIII-10 across the board, which only lasted
for less than a year, cannot be considered as having been practiced "over a long period of time."
While it is true that jurisprudence has not laid down any rule requiring a specific minimum number of
years in order for a practice to be considered as a voluntary act of the employer, under existing
jurisprudence on this matter, an act carried out within less than a year would certainly not qualify as
such. Hence, the withdrawal of the COLA Wage Order No. RBIII-10 from the salaries of non-minimum
wage earners did not amount to a "diminution of benefits" under the law.
There is also no basis in enjoining petitioner to implement Wage Order No. RBIII-11 across the board.
Similarly, no proof was presented showing that the implementation of wage orders across the board
has ripened into a company practice. In the same way that we required petitioner to prove the
existence of a company practice when it alleged the same as defense, at this instance, we also
require respondent to show proof of the company practice as it is now the party claiming its
existence. Absent any proof of specific, repetitive conduct that might constitute evidence of the
practice, we cannot give credence to respondent’s claim. The isolated act of implementing a wage

order across the board can hardly be considered a company practice,71 more so when such
implementation was erroneously made.
WHEREFORE, premises considered, the petition is PARTIALLY GRANTED. The CA Decision September
30, 2008 and Resolution dated December 4, 2008 are AFFIRMED with MODIFICATION that the order
for petitioner to continue implementing Wage Order No. RBIII-10 and 11 across the board is SET
ASIDE. Accordingly, item 10 of the NLRC Decision dated March 30, 2007 is modified to read "dismiss
the claim for implementation of Wage Order Nos. RBIII-10 and 11 to the employees who are not
minimum wage earners."SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 183122 June 15, 2011
GENERAL MILLING CORPORATION-INDEPENDENT LABOR UNION (GMC-ILU), Petitioner,
vs.
GENERAL MILLING CORPORATION, Respondent.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 183889
GENERAL MILLING CORPORATION, Petitioner,
vs.
GENERAL MILLING CORPORATION-INDEPENDENT LABOR UNION (GMC-ILU), ET.
AL, Respondents.
DECISION
PEREZ, J.:
Assailed in these petitions for review on certiorari filed pursuant to Rule 45 of the 1997 Rules of Civil
Procedure are the Court of Appeals’(CA) resolution of the separate petitions for certiorari questioning
the 20 July 2006 Decision1 rendered and the 23 August 2006 Resolution2 issued by the Fourth
Division of the National Labor Relations Commission (NLRC), Cebu City, in NLRC Case No. V-000632-
2005. In G.R. No. 183122, petitioner General Milling Corporation-Independent Labor Union (the
Union) seeks the reversal of the 10 October 2007 Decision rendered by the Special Twentieth Division
of the CA in CA-G.R. CEB-SP No. 02226,3 the dispositive portion of which states:
WHEREFORE, all the foregoing premises considered, the instant Petition is hereby PARTIALLY
GRANTED.
The July 20, 2006 Decision of respondent NLRC in NLRC Case No. V-000632-2005 is hereby
AFFIRMED insofar as it affirmed the October 27, 2005 Order of Executive Labor Arbiter Ortiz in RAB
Case No. VII-06-0475-1992 with the modification of: a) excluding the vacation leave salary rate
differentials, sick leave salary rate differentials, b) excluding employees who have executed quitclaims
which are hereby declared valid, and c) deducting salary increases and other employment benefits
voluntarily given by respondent GMC in the computation of benefits.
Labor Relation Set VI * CBA Cases* Page 43 of 63
Accordingly, the instant case is hereby REFERRED to the GRIEVANCE MACHINERY under the imposed
CBA for the recomputation of benefits claimed by petitioner GMC-ILU under the said imposed CBA
taking into consideration the guidelines laid down by the Court in this Decision as well as the validity
of the subject quitclaims hereinbefore discussed.SO ORDERED.4
In G.R. No. 183889, petitioner General Milling Corporation (GMC) prays for the setting aside of the 16
November 2007 Decision rendered by the Eighteenth Division of the CA in CA-G.R. CEB-SP No.
02232,5 the decretal portion of which states:
WHEREFORE, the Decision dated July 20, 2006 and the Resolution dated August 23, 2006 of public
respondent NLRC are hereby AFFIRMED IN TOTO and the instant petition is DISMISSED.SO
ORDERED.6
The Facts
On 28 April 1989, GMC and the Union entered into a collective bargaining agreement (CBA) which
provided, among other terms, the latter’s representation of the collective bargaining unit for a three-
year term made to retroact to 1 December 1988. On 29 November 1991 or one day before the
expiration of the subject CBA, the Union sent a draft CBA proposal to GMC, with a request for
counter-proposals from the latter, for the purpose of renegotiating the existing CBA between the
parties. In view of GMC’s failure to comply with said request, the Union commenced the complaint for
unfair labor practice which, under docket of RAB Case No. VII-06-0475-92, was dismissed for lack of
merit in a decision dated 21 December 1993 issued by the Regional Arbitration Branch-VII (RAB-VII)
of the National Labor Relations Commission (NLRC).7 On appeal, however, said dismissal was
reversed and set aside in the 30 January 1998 decision rendered by the Fourth Division of the NLRC
in NLRC Case No. V-0112-94,8 the dispositive portion of which states:
WHEREFORE, premises considered, the instant appeal is hereby GRANTED. The Decision dated
December 21, 1993 is hereby VACATED and SET ASIDE and a new one issued ordering the imposition
upon the respondent company of the complainant union[‘s] draft CBA proposal for the remaining two
years duration of the original CBA which is from December 1, 1991 to November 30, 1993; and for
the respondent to pay attorney’s fees.SO ORDERED.9
With the reconsideration and setting aside of the foregoing decision in the NLRC’s resolution dated 6
October 1998,10 the Union filed the petitions for certiorari docketed before the CA as CA-G.R. SP Nos.
50383 and 51763. In a decision dated 19 July 2000, the then Fourteenth Division of the CA reversed
and set aside the NLRC’s 6 October 1998 resolution and reinstated the aforesaid 30 January 1998
decision, except with respect to the undetermined award of attorney’s fees which was deleted for lack
of statement of the basis therefor in the assailed decision.11 Aggrieved by the CA’s 26 October 2000
resolution denying its motion for reconsideration, GMC elevated the case to this Court via the petition
for review on certiorari docketed before this Court as G.R. No. 146728. In a decision dated 11
February 2004 rendered by the Court’s then Second Division, the CA’s 30 January 1998 decision and
26 October 2000 resolution were affirmed,12 upon the following findings and conclusions, to wit:
 Labor Relation Set VI * CBA Cases* Page 44 of 63

GMC’s failure to make a timely reply to the proposals presented by the union is indicative of its utter employees who had been separated from the service; (c) 37 employees who, as daily paid rank and
lack of interest in bargaining with the union. Its excuse that it felt the union no longer represented file employees, were represented by another union and covered by a different CBA; and, (d) 41
the worker, was mainly dilatory as it turned out to be utterly baseless. workers holding managerial/supervisory/confidential positions.16 In its comment to the foregoing
"Submission", however, the Union argued that the benefits derived from its proposed CBA extended
to both union members and non-members; that the newly hired employees were entitled to the
We hold that GMC’s refusal to make a counter proposal to the union’s proposal for CBA negotiation is
benefits accruing after their employment by GMC; that the employees who had, in the meantime,
an indication of its bad faith. Where the employer did not even bother to submit an answer to the
been separated from service could not have validly waived the benefits which were only determined
bargaining proposals of the union, there is a clear evasion of the duty to bargain collectively.
with finality in the 11 February 2004 decision rendered in G.R. No. 146728; that the CBA benefits can
be extended the daily paid employees upon their re-classification as monthly paid employees as well
Failing to comply with the mandatory obligation to submit a reply to the union’s proposals, GMC as to GMC’s managerial and supervisory employees, prior to their promotion; and, that the imposition
violated its duty to bargain collectively, making it liable for unfair labor practice. Perforce, the Court of of its CBA proposals necessarily calls for the computation of the benefits therein provided.17
Appeals did not commit grave abuse of discretion amounting to lack or excess of jurisdiction in finding
that GMC is, under the circumstances, guilty of unfair labor practice.
Acting on the memoranda the parties filed in support of their respective positions,18 Executive Labor
Arbiter Violeta Ortiz-Bantug issued the 27 October 2005 order, limiting the computation of the
xxxx
benefits of the Union’s CBA proposal to the remaining two years of the duration of the original CBA or
x x x (I)t would be unfair to the union and its members if the terms and conditions contained in the
from 1 December 1991 up to 30 November 1993. The computation covered the 436 employees
old CBA would continue to be imposed on GMC’s employees for the remaining two (2) years of the
included in the Union’s list, less the following: (a) 77 employees who were hired or regularized after
CBA’s duration. We are not inclined to gratify GMC with an extended term of the old CBA after it
30 November 1993; (b) 36 daily paid rank and file employees who were covered by a separate CBA;
resorted to delaying tactics to prevent negotiations. Since it was GMC which violated the duty to
(c) 41 managerial/supervisory employees; and (d) 1 employee for whom no salary-rate information
bargain collectively, based on Kiok Loy and Divine World University of Tacloban, it had lost its
was submitted in the premises.19 As a consequence, said Executive Labor Arbiter disposed of the
statutory right to negotiate or renegotiate the terms and conditions of the draft CBA proposed by the
aforesaid pending motion and incidents in the following wise:
union.
xxxx
Based on all the foregoing, computations have been made, details of which are prepared and reflected
Under ordinary circumstances, it is not obligatory upon either side of a labor controversy to in separate pages but which still form part of this Order. By way of summary, the grand total consists
precipitately accept or agree to the proposals of the other. But an erring party should not be allowed of the following:
with impunity to schemes feigning negotiations by going through empty gestures. Thus, by imposing
on GMC the provisions of the draft CBA proposed by the union, in our view, the interests of equity and
fair play were properly served and both the parties regained equal footing, which was lost when GMC Salary Increase Differentials P17,575,000.00
thwarted the negotiations for new economic terms of the CBA.13
Rest Day 4,320,148.50
With the ensuing finality of the foregoing decision, the Union filed a motion for issuance of a writ of Vacation Leave Differentials 920,013.42
execution dated 21 March 2005, to enforce the claims of the covered employees which it computed in
the sum ofP433,786,786.36 and to require GMC to produce said employee’s time cards for the Sick Leave Differentials 920,013.42
purpose of computing their overtime pay, night shift differentials and labor standard benefits for work
rendered on rest days, legal holidays and special holidays.14 On 18 April 2005, however, GMC opposed School Opening Bonus 5,094,044.69
said motion on the ground, among other matters, that the bargaining unit no longer exist in view of
the resignation, retrenchment, retirement and separation from service of workers who have 13th Month Pay Differentials 1,468,999.98
additionally executed waivers and quitclaims acknowledging full settlement of their claims; that the
covered employees have already received salary increases and benefits for the period 1991 to 1993; Christmas Bonus 4,560,816.78
and, that aside from the aforesaid supervening events which precluded the enforcement thereof, the
decision rendered in the case simply called for the execution of a CBA incorporating the Union’s Signing Bonus 1,310,000.00
proposal, not the outright computation of benefits thereunder.15
Total Money Claims P36,169,036.79
In a "Submission" dated 27 May 2005, GMC further manifested that the Union membership in the
Sacks of Rice 6,372
bargaining unit did not exceed 286 and that following employees should be excluded from the
coverage of the decision sought to be enforced: (a) 47 employees who were hired after 1992; (b) 234

Issue the appropriate writ of execution based on the foregoing computations.SO ORDERED. 20
Aggrieved, the Union filed a partial appeal dated 2 November 2005, on the ground that the Executive
Labor Arbiter abused her discretion in: (a) confining the computation of the benefits from 1 December
1991 to 30 November 1993 in favor of only 281 employees out of the 436 included in its list; (b)
computing only 10 out of the 15 benefits provided under its CBA proposal; and (c) failing to direct the
GMC to produce the employees’ time cards and other pertinent documents essential for the
computation of the benefits due in the premises.21 In turn, GMC filed its 17 November 2005
"Objections" to the aforesaid 22 October 2005 order, arguing that the Executive Labor Arbiter not
only varied the dispositive portion of the NLRC decision dated 30 January 1998 but also ignored the
quitclaims executed and the benefits actually paid in the premises.22 Reiterating the foregoing
arguments in its 16 May 2006 opposition to the Union’s partial appeal, GMC further maintained that
its not being duly heard on the computation of the award in the subject 27 October 2005 order
rendered the Union’s partial appeal premature; and, that its CBA with the Union had expired on 30
November 1993, with the latter exerting no effort at all for its renewal.23
On 20 July 2006, the NLRC rendered a decision in NLRC Case No. V-000632-2005, affirming the
aforesaid 27 October 2005 order of execution. Finding that the duty to maintain the status quo and to
continue in full force and effect the terms of the existing agreement under Article 253 of the Labor
Code of the Philippines applies only when the parties agreed to the terms and conditions of the CBA,
the NLRC upheld the Executive Labor Arbiter’s computation on the ground, among others, that the
decision sought to be enforced covered only the remaining two years of the duration of the original
CBA, i.e., from 1 December 1991 to 30 November 1993; that like GMC’s supposed grant of additional
benefits during the remaining term of the original CBA, the Union’s claims for payment of vacation
leave salary differentials, sick leave salary rate differentials, dislocation allowance, separation pay for
voluntary resignation and separation pay salary rate differentials were not sufficiently established;
that required by law to preserve its records for a period of five years, GMC cannot possibly be
expected to preserve employees’ records for the period 1 December 1991 to 30 November 1993; and,
that the claimant has the burden of proving entitlement to holiday pay, premium for holiday and rest
day as well night shift differentials. Giving short shrift to GMC’s objections as aforesaid, the NLRC
likewise ruled that computation of the monetary award was necessary for the enforcement of this
Court’s 11 February 2004 decision and avoidance of multiplicity of suits.24
Dissatisfied with the NLRC’s 23 August 2006 denial of their motions for reconsideration of the
foregoing decision,25 GMC and the Union filed separate Rule 65 petitions for certiorari before the CA.
Docketed as CA-G.R. CEB-SP No. 02226 before the CA’s Special Twentieth Division, the Union’s
petition was partially granted in the 10 October 2007 decision rendered in the case,26 upon the finding
that the parties’ old CBA was superseded by the imposed CBA which provided a term of five years
from 1 December 1991 and remained in force until a new CBA is concluded between the parties.
Brushing aside the Executive Labor Arbiter’s computation of the benefits as "too sweeping" and
"inaccurate", the CA ruled that: (a) employees hired after the effectivity of the imposed CBA are
entitled to its benefits on their first day of work; (b) daily paid employees are entitled to said benefits
from the first day they became regular monthly paid employees; (c) managerial and supervisory
employees are entitled to the same benefits until their promotion as such; (d) employees for whom
no information as to salary rate were submitted are entitled to the CBA benefits upon submission of
Labor Relation Set VI * CBA Cases* Page 45 of 63
proof in respect thereto; and, (e) employees who signed Deeds of waiver, release and quitclaim are
no longer entitled to said benefits.27
Rejecting the argument that the NLRC erred in upholding the Executive Labor Arbiter’s computation of
only 10 out of the 15 benefits provided under the imposed CBA, the CA went on to take appropriate
note of the fact that no proof was submitted by the Union to justify the grant of said benefits. While
ruling that the imposed CBA had the same force and effect as a negotiated CBA, the CA, however,
faulted the Union for its "hasty" and "premature" filing of its motion for issuance of a writ of
execution, instead of first demanding the enforcement of the imposed CBA from GMC and, failing the
same, referring the matter to the grievance machinery or voluntary arbitration provided under the
imposed CBA, in accordance with Articles 260 and 261 of the Labor Code. Acknowledging the difficulty
of computing the benefits demanded by the Union in the absence of evidence upon which to base the
same, the CA referred the case to the Grievance Machinery under the imposed CBA and directed the
exclusion of the following items from said computation: (a) the Union’s claims for vacation leave
salary rate differentials and sick leave salary rate differentials; (b) the benefits in favor of the
employees who have already executed quitclaims in favor of GMC; and (c) the salary increases and
other employment benefits GMC had, in the meantime, extended its employees.28 Discontented with
the CA’s 14 May 2008 resolution denying its motion for reconsideration of the foregoing
decision,29 the Union filed its Rule 45 petition currently docketed before this Court as G.R. No.
183122.30
On the other hand, GMC’s petition for certiorari assailing the NLRC’s 20 July 2006 decision was
docketed as CA-G.R. SP No. CEB-SP No. 02232 before the CA’s Eighteenth Division31 which
subsequently rendered the decision dated on 16 November 2007, dismissing the same for lack of
merit. Finding that both parties were given an opportunity to present their respective positions during
the pre-execution conference conducted a quo, the CA ruled that the Executive Labor Arbiter’s 27
October 2005 order had attained finality insofar as GMC is concerned, in view of its failure to perfect
an appeal therefrom by paying the required appeal fee and posting the cash or surety bond in an
amount equivalent to the benefits computed. In addition to rejecting GMC’s argument that the
quitclaims executed by its employees were in the nature of a supervening event which rendered
execution proceedings impossible, the CA held that said quitclaims did not extend to the benefits
provided under the imposed CBA and that the additional benefits supposedly received by GMC’s
employees should not be deducted therefrom, for lack of sufficient evidence to prove the
same.32 Aggrieved by the denial of its motion for reconsideration of the foregoing decision in the CA’s
resolution dated 10 July, 2008,33 GMC filed the petition for review on certiorari docketed before us as
G.R. No. 183889.34
The Issues
In G.R. No. 183122, the Union proffers the following grounds for the grant of its petition, to wit:
I. THE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION AND COMMITTED
REVERSIBLE ERROR IN AFFIRMING THE COMPUTATION OF THE NLRC IN ITS DECISION
DATED JULY 20, 2006 AND DISTORTING THE APPLICATION OF ARTICLE 253 OF THE LABOR

CODE IN THE EXECUTION OF THE DECISION OF THIS HONORABLE COURT IN G.R. NO.
146728.
II. THE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION AND COMMITTED
REVERSIBLE ERROR IN EXCLUDING FROM THE COMPUTATION THE EMPLOYEES WHO HAVE
EXECUTED QUITCLAIMS, IN EXCLUDING FROM THE COMPUTATION VACATION AND SICK
LEAVE SALARY DIFFERENTIALS, AND IN DEDUCTING ALLEGED SALARY INCREASES AND
OTHER BENEFITS GIVEN BY [GMC].
III. THE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION AND COMMITTED
REVERSIBLE ERROR IN REFERRING THE INSTANT CASE TO THE GRIEVANCE MACHINERY
FOR COMPUTATION OF THE BENEFITS DUE UNDER THE IMPOSED CBA.
IV. THE DECISION IN THE INSTANT CASE IS IN DIRECT CONFLICT WITH THE DECISION OF
ANOTHER DIVISION OF THE COURT OF APPEALS INVOLVING THE SAME ISSUES.35
In G.R. No. 183889, GMC prays for the setting aside of the CA’s 16 November 2007 decision in CA-
G.R. CEB-SP No. 02232, on the following grounds, to wit:
A. THE DECISION OF NOVEMBER 16, 2007 AND THE RESOLUTION OF JULY 10, 2008 OF THE
COURT OF APPEALS ARE CONTRARY TO LAW.
B. THE DECISION OF NOVEMBER 16, 2007 AND THE RESOLUTION OF JULY 10, 2008 OF THE
COURT OF APPEALS ARE NOT IN ACCORD WITH THE APPLICABLE DECISIONS OF THIS
HONORABLE COURT.
C. THE DECISION OF NOVEMBER 16, 2007 AND THE RESOLUTION OF JULY 10, 2008 OF THE
COURT OF APPEALS ARE CONTRARY TO THE ESTABLISHED FACTS.
D. THE DECISION OF NOVEMBER 16, 2007 AND THE RESOLUTION OF JULY 10, 2008 OF THE
COURT OF APPEALS VIOLATE THE LAW OF THE CASE.
E. THE DECISION OF NOVEMBER 16, 2007 AND THE RESOLUTION OF JULY 10, 2008 OF THE
COURT OF APPEALS CONTRAVENE THEIR OWN DECISION IN AN EXACTLY SIMILAR CASE
INVOLVING THE SAME PARTIES.36
As may be gleaned from the grounds GMC and the Union interpose in support of their respective
petitions, it is evident that we are called upon to determine the following matters: (a) the period of
effectivity of the imposed CBA; (b) the employees covered by the imposed CBA; and, (c) the benefits
to be included in the execution of the 11 February 2004 decision rendered in G.R. No. 146728.
Preliminary to the foregoing considerations is the effect of the rendition of diametrically opposed
decisions in CA-G.R. CEB. SP Nos. 02226 and 02232 by the CA’s Special Twentieth and Eighteenth
Divisions on the parties’ conflicting claims.
Labor Relation Set VI * CBA Cases* Page 46 of 63
The Court’s Ruling
We find the reversal of the assailed decisions in order.
Both GMC and the Union call our attention to the fact that the 10 October 2007 decision rendered by
the CA’s Special Twentieth Division in CA-G.R. CEB-SP No. 02226 is in conflict with the 16 November
2007 decision rendered by the same court’s Eighteenth Division in CA-G.R. CEB-SP No. 02232. In
G.R. No. 183122, the Union argues that, given the identity of parties and issues raised in said cases,
the 16 November 2007 decision in CA-G.R. CEB-SP No. 02232 should have been taken considered
and adopted by the CA’s Special Twentieth Division in resolving its motion for reconsideration of the
10 October 2007 decision in CA-G.R. CEB-SP No. 02226.37 In G.R. No. 183889, on the other hand,
GMC maintains that, having been rendered ahead of the 16 November 2007 decision in CA-G.R. CEB-
SP No. 02232, the CA’s Special Twentieth Division’s 10 October 2007 in CA-G.R. CEB-SP No. 02226 is
the law of the case which the Eighteenth Division erroneously contravened when it dismissed its
petition for certiorari.38
The conflicting decisions in CA-G.R. CEB-SP Nos. 02226 and 02232 would have been, in the first
place, avoided had the CA consolidated said cases pursuant to Section 3, Rule III of its 2002 Internal
Rules (IRCA).39 Being intimately and substantially related cases, their consolidation should have been
ordered to avert the possibility of conflicting decisions in the two cases.40 Although rendered on the
merits by a court of competent jurisdiction acting within its authority, neither one of said decisions
can, however, be invoked as law of the case insofar as the other case is concerned. The doctrine of
"law of the case" means that whatever is once irrevocably established as the controlling legal rule or
decision between the same parties in the same case continues to be the law of the case, whether
correct on general principles or not,41 so long as the facts on which such decision was predicated
continue to be the facts of the case before the court.42 Considering that a decision becomes the law of
the case once it attains finality,43 it is evident that, without having achieved said status, the herein
assailed decisions cannot be invoked as the law of the case by either GMC or the Union.
Anent its period of effectivity, Article XIV of the imposed CBA provides that "(t)his Agreement shall be
in full force and effect for a period of five (5) years from 1 December 1991, provided that sixty (60)
days prior to the lapse of the third year of effectivity hereof, the parties shall open negotiations on
economic aspect for the fourth and fifth years effectivity of this Agreement." 44 Considering that no
new CBA had been, in the meantime, agreed upon by GMC and the Union, we find that the CA’s
Special Twentieth Division correctly ruled in CA-G.R. CEB-SP No. 02226 that, pursuant to Article 253
of the Labor Code,45 the provisions of the imposed CBA continues to have full force and effect until a
new CBA has been entered into by the parties. Article 253 mandates the parties to keep the status
quo and to continue in full force and effect the terms and conditions of the existing agreement during
the 60-day period prior to the expiration of the old CBA and/or until a new agreement is reached by
the parties.46In the same manner that it does not provide for any exception nor qualification on which
economic provisions of the existing agreement are to retain its force and effect,47 the law does not
distinguish between a CBA duly agreed upon by the parties and an imposed CBA like the one under
consideration.

The foregoing disquisition notwithstanding, it bears emphasizing, however, that the dispositive portion
of the 30 January 1998 decision rendered by the Fourth Division of the NLRC in NLRC Case No. V-
0112-94 specifically ordered "the imposition upon [GMC] of the [Union’s] draft CBA proposal for the
remaining two years duration of the original CBA which is from 1 December 1991 to 30 November
1993."48 Initially set aside in the 6 October 1998 resolution issued in the same case by the
NLRC49 and reinstated in the 19 July 2000 decision rendered by the CA’s then Fourteenth Division in
CA-G.R. SP Nos. 50383 and 51763,50 said 30 January 1998 decision was upheld in the 11 February
2004 decision rendered by this Court in G.R. No. 146728 which, in turn, affirmed the CA’s 19 July
2000 decision as aforesaid.51 Considering that the 30 January 1998 decision sought to be enforced
confined the application of the imposed CBA to the remaining two-year duration of the original CBA,
we find that the computation of the benefits due GMC’s covered employees was correctly limited to
the period 1 December 1991 to 30 November 1993 in the 27 October 2005 order issued by Executive
Labor Arbiter Violeta Ortiz-Bantug and the 20 July 2006 decision rendered by the NLRC in NLRC Case
No. V-000632-2005.
Consequently, insofar as the execution of the 30 January 1998 decision is concerned, the Union is out
on a limb in espousing a computation which extends the benefits of the imposed CBA beyond the
remaining two-year duration of the original CBA. The rule is, after all, settled that an order of
execution which varies the tenor of the judgment or exceeds the terms thereof is a nullity. 52 Since
execution not in harmony with the judgment is bereft of validity,53 it must conform, more particularly,
to that ordained or decreed in the dispositive portion of the decision sought to be enforced.
Considering that the decision sought to be enforced pertains to the period 1 December 1991 to 30
November 1993, it necessarily follows that the computation of benefits under the imposed CBA should
be limited to covered employees who were in GMC’s employ during said period of time. While it is true
that the provisions of the imposed CBA extend beyond said remaining two-year duration of the
original CBA in view of the parties’ admitted failure to conclude a new CBA, the corresponding
computation of the benefits accruing in favor of GMC’s covered employees after the term of the
original CBA was correctly excluded in the aforesaid 27 October 2005 order issued in RAB VII-06-
0475-1992. Rather than the abbreviated pre-execution proceedings before Executive Labor Arbiter
Violeta Ortiz-Bantug, the computation of the same benefits beyond 30 November 1993 should,
instead, be threshed out by GMC and the Union in accordance with the Grievance Procedure outlined
as follows under Article XII of the imposed CBA, to wit:
Article XII
GRIEVANCE PROCEDURE
Section 1. Whenever an employee covered by the terms of this Agreement believes that the
COMPANY has violated the express terms thereof, or is aggrieved on the enforcement or application of
the COMPANY’s personnel policies, he/she shall be required to follow the procedure hereinafter set
forth in processing the grievance. The COMPANY will not be required to consider a grievance unless it
is presented within 7 days from the alleged breach of the express terms of this Agreement or the
COMPANY personnel policies,
STEP I. The employee, through the UNION Steward, shall present the alleged grievance in writing to
the immediate superior and they shall endeavor to settle the grievance within ten (10) days.
Labor Relation Set VI * CBA Cases* Page 47 of 63
STEP II. Failing the settlement in Step I, the UNION President and the Personnel Officer shall meet
and adjust the grievance within fifteen (15) days.
STEP III. Any unresolved grievance shall be referred to the Arbitration Committee provided
hereunder.
Section 2. Procedure before the Grievance Committee.
A. In the event a dispute arises concerning the application or interpretation of the terms of
this Agreement or enforcement/application of the COMPANY personnel policies which cannot
be settled pursuant to Section I and II, Section 1 hereof, an Arbitration Committee shall be
formed for the purpose of settling that particular dispute only. The Grievance Committee
shall be composed of three (3) members, one to be appointed by the COMPANY as its
representative, another to be appointed by the UNION, and the third to be appointed by
common agreement of the two representatives selected from among the list of accredited
voluntary arbitrators in the Province of Cebu, or from government officials or civic leaders
and responsible citizens in the community.
B. In all meetings of the Grievance Committee organized for the purpose of resolving a
particular dispute, all members must be present and no business shall be deliberated upon if
any member thereof is absent. However, if any member is unable to attend the meeting,
he/she shall immediately appoint one to represent him/her, but if the one appointed by
agreement of both representatives of the COMPANY and the UNION is the one absent, the
two representatives present shall agree between themselves on any person to take the place
of the absent member. Any business or matter shall be considered as passed and approved
by the Committee when there is a vote thereo[n] by at least two (2) members present and
the same shall be final and binding on the parties concerned.
C. All decisions of the Committee shall be final: provided, however, that all decisions of the
Committee shall be limited to the terms and provisions of this Agreement and in no event
may the terms and provisions of this Agreement be altered, amended or modified by the
Committee.54
Article II of the imposed CBA, relatedly, provides that "(t)he employees covered by this Agreement
are those employed as regular monthly paid employees at the [GMC] offices in Cebu City and
Lapulapu City, including cadet engineers, salesmen, veterinarians, field and laboratory workers, with
the exception of managerial employees, supervisory employees, executive and confidential
secretaries, probationary employees and the employees covered by a separate Collective Bargaining
Agreement at the Company’s Mill in Lapulapu City."55 Gauged from the express language of the
foregoing provision, we find that Executive Labor Arbiter Violeta Ortiz-Bantug correctly excluded the
following employees from the list of 436 employees submitted by the Union56 and the computation of
the benefits for the period 1 December 1991 to 30 November 1993, to wit: (a) 77 employees who
were hired or regularized after 30 November 1993; (b) 36 daily paid rank and file employees who
were covered by a separate CBA; (c) 41 managerial/supervisory employees; and, (d) 1 employee for
whom no salary-rate information was submitted in the premises.57 However, we find that the 234

employees who had already been separated from GMC’s employ by the time of the rendition of the 11
February 2004 decision in G.R. No. 146728 should further be added to these excluded employees.
The record shows that said 234 employees were union members whose employment with GMC ceased
as a consequence of death, termination due to redundancy, termination due to closure of plant,
termination for cause, voluntary resignation, separation or dismissal from service as well as
retirement.58 Upon compliance with GMC’s clearance requirements59 and in consideration of sums
ranging from P38,980.12 to P631,898.72, due payment and receipt of which were duly acknowledged,
it appears that said employees executed deeds of waiver, release and quitclaim60 which uniformly
stated as follows:
THAT, for and in consideration of the said payment, I have remised, released and do hereby
discharge, and by these presents do for myself, my heirs, executors and administrators, remise,
release and forever discharge said GENERAL MILLING CORPORATION, its successors and assigns,
and/or any of its officers or employees of and from any and all manner of actions, cause or causes of
actions, sum or sums of money, account damages, claims and demands whatsoever by way of
separation pay, benefits, bonuses, and all other rights to compensation, salary, wage, emolument,
reimbursement, or monetary benefits, which I ever had, now have or which my heirs , executors and
administrators hereafter can, shall or may have, upon or by reason of any matter, cause or things
whatsoever in connection with my former employment in and retirement from the said GENERAL
MILLING CORPORATION.1avvphi1
THAT, I have signed this Deed of Waiver, Release and Quitclaim after I have read the contents
thereof and understood the same and its legal effects.
In its assailed 16 November 2007 decision in CA-G.R. CEB-SP No. 02232, the CA’s then Eighteenth
Division brushed aside said deeds of waiver, release and quitclaim on the ground, among other
matters, that the same only covered the employees’ separation pay and retirement benefits but did
not extend to the benefits which had accrued in their favor under the imposed CBA; and, that to be
valid, the waiver "should be couched in clear and unequivocal terms leaving no doubt as to the
intention of those giving up a right or a benefit that legally pertains to them." 61 In so doing, however,
the CA’s Eighteenth Division egregiously disregarded the clear intent on the part of the employees
who executed said deeds of waiver, release and quitclaim to relinquish all present and future claims
arising out of their employment with GMC. Although generally looked upon with disfavor,62 it cannot
be gainsaid that legitimate waivers that represent a voluntary and reasonable settlement of laborers'
claims should be so respected by the Court as the law between the parties.63 It is only where there is
clear proof that the waiver was wangled from an unsuspecting or gullible person, or the terms of
settlement are unconscionable on its face, that the law will step in to annul the questionable
transaction.64 The absence of showing of these factors in the case at bench impels us to uphold the
validity of said deeds of waiver, release and quitclaim and, to exclude the employees who executed
the same from those still entitled to the benefits under the imposed CBA both before and after the
remaining term of the original CBA. The waiver was all inclusive. There was not even a hint of a
limitation of coverage.
Labor Relation Set VI * CBA Cases* Page 48 of 63
Inasmuch as mere allegation is not evidence, the basic evidentiary rule is to the effect that the
burden of evidence lies with the party who asserts the affirmative of an issue has the burden of
proving the same65 with such quantum of evidence required by law. In administrative or quasi-judicial
proceedings like those conducted before the NLRC, the standard of proof is substantial evidence which
is understood to be more than just a scintilla or such amount of relevant evidence which a reasonable
mind might accept as adequate to justify a conclusion.66Since it does not mean just any evidence in
the record of the case for, otherwise, no finding of fact would be wanting in basis, the test to be
applied is whether a reasonable mind, after considering all the relevant evidence in the record of a
case, would accept the findings of fact as adequate.67 Viewed in the light of Union’s failure to prove
the factual bases for the computation of the same, we find that the NLRC correctly affirmed Executive
Labor Arbiter Violeta Ortiz-Bantug’s exclusion of the following benefits from the order dated 27
October, 2005, to wit: (a) vacation leave salary rate differentials; (b) sick leave salary rate
differentials; (c) dislocation allowance; (d) separation pay for voluntary resignation; and (e)
separation pay salary rate differentials.68 For want of substantial evidence to prove the same, the CA’s
Eighteenth Division also correctly brushed aside GMC’s insistence on the deduction of the additional
benefits it purportedly extended to its employees from 1 December 1991 to 30 November 1993. 69
As for the benefits after the expiration of the term of the parties’ original CBA, we find that the extent
thereof as well as identity of the employees entitled thereto will be better and more thoroughly
threshed out by the parties themselves in accordance with the grievance procedure outlined in Article
XII of the imposed CBA. Aside from being already beyond the scope of the decision sought to be
enforced, these matters will not be accurately ascertained from the summaries of claims the parties
have been wont to submit at the pre-execution conference conducted a quo. Taking into consideration
such factors as hiring of new employees, personnel movement and/or promotions as well as
separations from employment which may have, in the meantime, occurred after the expiration of the
remaining term of the original CBA, the identity of the covered employees as well as the extent of the
benefits due them should clearly be reckoned from acquisition and/or until loss of their status as
regular monthly paid GMC employees. Since the computation must likewise necessarily take into
consideration the increases in salaries and benefits that may have been given in the intervening
period, both GMC and the Union are enjoined to make the pertinent employment and company
records available to each other, to facilitate the expeditious and accurate determination of said
benefits.
WHEREFORE, premises considered the assailed decisions dated 10 October 2007 and 16 November
2007 are REVERSED and SET ASIDE. In lieu thereof, the 27 October 2005 order issued by Labor
Arbiter Violeta Ortiz-Bantug is ordered REINSTATED and MODIFIED to further exclude the 234
employees who have executed deeds of waiver, release and quitclaim from the computation of the
benefits for the remaining term of the original CBA.SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 203957 July 30, 2014

UNIVERSITY OF SANTO TOMAS FACULTY UNION, Petitioner,
vs.
UNIVERSITY OF STO. TOMAS, Respondent.
DECISION
CARPIO, J.:
The Case
G.R. No. 203957 is a petition for review1 assailing the Decision2 promulgated on 13 July 2012 as well
as the Resolution3 promulgated on 19 October 2012 by the Court of Appeals (CA) in CA-G.R. SP No.
120970. The CA set aside the 8 June 2011 Decision4 and 29 July 2011 Resolution5 of the Fourth
Division of the National Labor Relations Commission (NLRC) in NLRC LAC No. 10-003370-08, as well
as the 24 September 2010 Decision6 of the Labor Arbiter (LA) in NLRC-NCR Case No. 09-09745-07.
In its 24 September 2010 decision, the LA ordered the University of Santo Tomas (UST) to
remit P18,000,000.00 to the hospitalization and medical benefits fund (fund) pursuant to the mandate
of the 1996-2001 Collective Bargaining Agreement (CBA).The LA also ordered UST to pay 10% of the
total monetary award as attorney’s fees. The other claims were dismissed for lack of merit. In its 8
June 2011 decision, the NLRC ordered UST to remit to the University of Santo Tomas Faculty Union
(USTFU) the amounts of P80,000,000.00 for the fund pursuant to the CBA and P8,000,000.00 as
attorney’s fees equivalent to 10% of the monetary award. The NLRC denied UST’s motion for
reconsideration for lack of merit.
In its 13 July 2012 decision, the CA found grave abuse of discretion on the part of NLRC and granted
UST’s petition. The CA set aside the decisions of the NLRC and the LA, without prejudice to the refiling
of USTFU’s complaint in the proper forum. The CA denied USTFU’s motion for reconsideration for lack
of merit.
The Facts
The CA recited the facts as follows:
In a letter dated February 6, 2007, [USTFU] demanded from [UST], through its Rector, Fr. Ernesto M.
Arceo, O.P. ("Fr. Arceo"), remittance of the total amount of P65,000,000.00 plus legal interest
thereon, representing deficiency in its contribution to the medical and hospitalization fund ("fund") of
[UST’s] faculty members. [USTFU] also sent [UST] a letter dated February 26, 2007, accompanied by
a summary of its claims pursuant to their 1996-2001 CBA.
On March 2, 2007, Fr. Arceo informed [USTFU] that the aforesaid benefits were not meant to be given
annually but rather as a one-time allocation or contribution to the fund.[USTFU] then sent [UST]
another demand letter dated June 24, 2007 reiterating its position that [UST] is obliged to remit to
the fund, its contributions not only for the years 1996-1997 but also for the subsequent years, but to
no avail.
Labor Relation Set VI * CBA Cases* Page 49 of 63
Thus, on September 5, 2007 [USTFU] filed against [UST], a complaint for unfair labor practice, as well
as for moral and exemplary damages plus attorney’s fees before the arbitration branch of the NLRC.
[UST] sought the dismissal of the complaint on the ground of lack of jurisdiction. It contended that
the case falls within the exclusive jurisdiction of the voluntary arbitratoror panel of voluntary
arbitrators because it involves the interpretation and implementation of the provisions of the CBA;
and the conflict between the herein parties must be resolved as grievance under the CBA and not as
unfair labor practice.
[UST’s] motion to dismiss was denied by the LA in its August 8, 2008 order. [UST] appealed the Order
to the NLRC. The NLRC Seventh Division, however, dismissed the appeal on May 12, 2009 and
remanded the case to the LA for further proceedings.
The NLRC, in its assailed decision, correctly summarized the issues and submissions of the
hereinparties in their respective position papers, as follows:
According to [UST], the parties had, in the past, concluded several Collective Bargaining Agreements
for the mutual benefit of the union members and [UST], and one of these agreements was the 1996-
2001 CBA. It is undisputed that one of the economic benefits granted by [UST] under the said CBA
was the "Hospitalization Fund," provided under Section 1-A(4) of the Article XIII thereof, the pertinent
provisions of which state:
ARTICLE XIII
ECONOMIC BENEFITS
Section 1. ECONOMIC BENEFITUpon ratification and approval and for the term of this Agreement, the
economic benefits to be granted by the UNIVERSITY and the schedule of such releases are as follows:
A. School Year 1996-97 (June 1, 1996 to May 31, 1997):
xxx
4. Hospitalization Fund: Upon ratification and approval hereof, the UNIVERSITY shall establish a
perpetual hospitalization and medical benefits fund in the sum of TWO MILLION PESOS (P2,000,000)
to be managed conjointly by a hospitalization and medical benefits committee where both
management and union are equally represented.
xxx
B. School Year 1997-98 (June 1, 1997-May 31, 1998);
xxx
2. Hospitalization Fund: The UNIVERSITY shall contribute the sum of ONE MILLION PESOS
(P1,000,000) to augment the Hospitalization and Medical Benefits fund. The saidsum shall be addedto
the remaining balance of theaforementioned fund;
xxx
C. School Year 1998-99 (June 1, 1998-May 31, 1999);
xxx
 Labor Relation Set VI * CBA Cases* Page 50 of 63

2. Hospitalization Fund: The UNIVERSITY shall contribute the sum of ONE MILLION PESOS
Year 1 Year 2 Year 3 Year 4 Year 5 Actual Total
(P1,000,000) to augment the Hospitalization and Medical Benefits Fund. The said sum shall be added
1996-97 1997-98 1998-99 1999-00 2000-01 amount amount to
to the remaining balance of the aforementioned fund;
remitted [be]
D. Miscellaneous Provisions:
remitted
xxx
2M 2M did not 2M did not 2M did not 2M did not 2M 10M
2. All the economic benefits herein given and those elsewhere provided under this agreement, other remitted slide slide slide slide
than retirement benefits and one-half of the signing bonus, are chargeable to the tuition fee share, if
any, of the faculty members; 1M 1M did not 1M did not 1M did not 1M 4M
remitted slide slide slide
xxx xxx xxx
1M 1M did not 1M did not 1M 3M
remitted slide slide
[USTFU] added that the amount offour (4) million pesos was agreed to be paid by the Universityto the
Hospitalization Fund annually for the fourth and fifth year of their CBA, pursuant to the parties’ 4M 4M did not 4M 8M
Memorandum of Agreement (MOA) which embodied the renegotiated economic provisions of the said remitted slide
CBAfor the years 1999-2000 and 2000-2001.
Total 8M 25M
According to [USTFU], Section D(2) of the 1996-2001 CBA provides that:
[USTFU] added that after the fifth year of the CBA, i.e. 2001 onwards, [UST] ought to remit the
‘All the economic benefitsherein given and those elsewhere provided under thisagreement, other than amount ofP8,000,000.00 ([2]M+1M+1M+4M) annually to the Hospitalization and Medical Benefits
retirement benefits and one-half of the signing bonus, are chargeable to the tuition fee share, if any, Fund. Hence, for the school year2001-2002 up to the school year 2005-2006, an additional amount
of the faculty members.’ of P24,000,000.00 (8M x 3) should have been remitted by [UST] to the aforesaid fund.All in all, the
total amount yet to be remitted had ballooned toP81,000,000.00.
[USTFU] explained that the rationale for the above-quoted provision is that the economic benefits
under the said CBA like the Hospitalization and Medical BenefitsFund, are sourced from the tuition fee Furthermore, [USTFU] averred that [UST] likewise failed and refused to render a proper accounting
increases and pursuant thereto, [UST] is obligated to remit the amount of P2,000,000.00 not only in ofthe monies it paid or released to the covered faculty as well as the money it received as tuition fee
the first year of the CBA (1996-1997) but also in the subsequent years because the said amount increase starting from school year 1997-1998 onwards thereby violating Section D (1), Article XIII of
became an integral part of the current or existing tuition fee. Furthermore, [UST] is likewise obligated the 1996-2001 CBA which provides that:
to slide in the amounts allocated for the Hospitalization and Medical Benefits Fund for the succeeding
years to the next CBA year and so on and so forth. [USTFU] claimed that the tuition fee increase once ‘At the end of this agreement, and within three (3) months therefrom, the UNIVERSITY shall render
integrated to the old amount of tuition fee becomes and remains an integral part of the existing an accounting of the monies it paid or released to the covered faculty in consequence hereof.’
tuition fee.

[USTFU] averred that while [UST] remitted the amount of P2,000,000.00 during the first year of the
1996-2001 CBA, [UST] did not slide-in or remit the said amount in the succeeding year (1997-1998).
[UST] only remitted the amount of P1,000.000,000.00 [sic] for the CBA year 1998-1999. Moreover,
[UST] remitted only the amount ofP1,000,000.00 on the third year of the CBA instead
of P4,000,000.00 (2 Million + 1 Million + 1 Million). And though [UST] remitted the amount
of P4,000,000 during the fourth year (2) [sic] of the 1996-2001 CBA, it did not remit any amount at
all during the fifth year of the said Agreement.
[USTFU] claimed that during the period of the 1996-2001 CBA, [UST] should have remitted the total
amount ofP25,000,000.00 instead of P8,000,000.00 only. Thus, a deficiency of P17,000,000.00.
[USTFU’s] assertion is based on the following illustration:
On the other hand, [UST] claimed that it religiously complied with the economic provisions of the
1996-2001CBA particularly its obligation to remit to the Hospitalization and Medical Benefits Fund as
the renegotiated economic provisions under the MOA by remitting the total amount of P8,000,000.00.
[UST] claimed that it was never the intention of the parties to the CBA that the amounts deposited to
the Hospitalization fund for each year shall be carried over to the succeeding years. UST added that
the MOA likewise madeno mention that the amount ofP4,000,000.00 corresponding to the school year
1999-2000 should be carried over to the next school year. Thus, it was safe to conclude that the clear
intention of the parties was that the amounts indicated on the CBA should only be remitted once on
the scheduled school year. Accordingly, [UST] averred that it was not guilty of unfair labor practice.
[UST] further argued that the claim of [USTFU] had already been barred by prescription since under
Article 290 of the Labor Code all unfair labor practice [cases] should be filed within one (1) year from
 Labor Relation Set VI * CBA Cases* Page 51 of 63

the accrual thereof otherwise they shall forever be barred. And assuming that the instance [sic] case Corollarily, the CBA covering the period SY 2001-2006 [UST] is under obligation to remit two (2)
may be considered as a money claim, the same already prescribed after three (3) years fromthe time million (P2,000,000.00) [sic] pesos every year or a total of ten million (P10,000,000.00) pesos in
the cause of action accrued. addition to whatever augmented amount stipulated in the CBA.

Finally, [UST] maintained that the present dispute should not be treated as unfair labor practice but In fine, the total unremitted amountto the [hospitalization and medical benefits] fund is eighteen
should be resolved as a grievance under the CBA and referred to a Voluntary Arbitrator. million (P18,000,000.00) pesos. P8M for SY 1996-2001 and P10M for SY 2001-2006.9

The parties thereafter submitted their respective Replies and Rejoinders amplifying their arguments The LA did not find UST’s non-compliance with the 1996-2001 CBA as acts that constituteunfair labor
while refuting those made by the other.7 practice.

The Labor Arbiter’s Ruling The failure of [UST] to slide in yearly the P2M hospitalization fund is not violation of the CBA but an
error in the interpretation of the provision of the CBA. It could not be said eitherthat [UST] acted with
malice and bad faith in view of the compliance with the other economic provision[s] of the CBA. An
The LA ruled in favor of USTFU.The LA classified USTFU’s complaint as one for "unfair labor practice,
error in the interpretation of a provision in the CBA, absent any malice or bad faith could not be
claims for sliding in of funds to hospitalization and medical benefits under the CBA, damages and
considered as unfair laborpractice as held in the case of Singapore Airlines Local Employees
attorney’s fee with prayer for slide-in and restoration of medical benefits under the CBA."8 The LA
Association vs. NLRC, et al., 130 SCRA 472.10
ruled that UST was not able to comply with Article XIII, Section 1A-(4) of the 1996-2001 CBA.
However, despite UST’s alleged non-compliance, the LA ruled that UST did not commit unfair labor
practice. The dispositive portion of the LA’s Decision reads:

The LA interpreted the pertinent CBA provisions to mean that UST bound itself to contribute to the WHEREFORE, premised on the foregoing considerations, judgment is hereby rendered ordering [UST]
fundP2,000,000.00 every school year, regardless of the appropriated augmentation amount. The LA to remit the amount of eighteen million (P18,000,000.00) pesos to [the] hospitalization and medical
computed UST’s liability in this manner: benefits fund pursuant tothe mandate of the Collective Bargaining Agreement on economic benefits.

Considering that the pertinent provision of the [1996-2001] CBA Article XIII, Section 1A(4) stated [UST is] likewise directed to pay attorney’s fee[s] equivalent to ten (10) percent of the total monetary
that"The University shall establish a perpetual hospitalization and medical benefits fund in the sum of award in this case.
two million pesos (P2,000,000.00) x x x x" it follows that the amount of P2M every school year must
beslided in regardless of the augmentation amount as may be appropriated. The wordshall is
Other claims dismissed for lack of merit.SO ORDERED.11
mandatory and the word perpetual [is] continuous thus, [UST] is obligated to remit the actual amount
to wit:
USTFU filed a Memorandum of Partial Appeal12 from the LA’s Decision. USTFU claimed that the LA
erred in holding that UST is liable to USTFU in the amount of P18 million only, and in not holding that
SY 1996-1997 – P2M = P2M the amounts claimed by USTFU should beremitted by UST to USTFU. USTFU claimed that, as of 2011,
UST’s total liability to the fund is P97 million: P17 million for CBA years 1996 to 2001, P40 million for
SY 1997-1998 – P2M + P1M = P3M CBA years 2001 to 2006, and P40 million for CBA years 2006 to 2011. USTFU also claimed that the
amount should be remitted byUST to USTFU for proper turnover to the fund.
SY 1998-1999 – P2M + P1M = P3M
UST, on the other hand, filed an Appeal Memorandum.13 UST claimed that the LA committed grave
SY 1999-2000 – P4M (Renegotiated) = P4M
abuse of discretion in taking cognizance over the case because the issue is within the jurisdiction of
SY 2000-2001 – P4M = P4M the voluntary arbitrator. UST further claimed that the LA committed grave abuse of discretion in
finding that UST erred in its interpretation of the CBA and in not finding that USTFU’s claims are
TOTAL REMITTANCE = P16M already barred by prescription.

The NLRC’s Ruling

Thus, [UST] therefore has an unremitted fund of Eight Million (P8,000,000.00) pesos.
 Labor Relation Set VI * CBA Cases* Page 52 of 63

The NLRC granted USTFU’s appeal and denied UST’s appeal for lack of merit. The NLRC ordered UST
Year 1 Year 2 Year 3 Year 4 Total amount
to pay USTFU P80,000,000.00 and attorney’s fees equivalent to ten percent of the monetary award.
2001-02 2002-03 2003-04 2005-06 that should be
submitted
The NLRC pointed out that UST’s refusal to comply, despite repeated demands, with the CBA’s
economic provisions is tantamount to a gross and flagrant violation. Thus, the present case properly 2M 2M 2M 2M
falls under the LA’s original jurisdiction as well as the NLRC’s appellate jurisdiction. The issue of
prescription also cannot be heldagainst USTFU because the cause of action accrued only when UST 3M 3M 3M
refused to comply with USTFU’s 6 February 2007 demand letter. The demand letter was sent only
after the conduct of proceedings in the Permanent Union-University Committee (PUUC). 3M 3M

2M + 5M + 8M + 8M = 23M
The NLRC noted that the subsequent CBAs between UST and USTFU show that the parties
intendedthat the amount appropriated each year to augment the fund shall be carried over to the
succeeding years and is chargeable to the tuition fee increment. The NLRC ruled that the amounts For the 2006-2011 CBA:
appropriated for each year during the effectivity of the 1996-2001 CBA should still be appropriated to
the succeeding years. From school year 1997-1998 and onwards, the basis for suchcarry over is that
the amounts were sourced from tuition increases corresponding to a given school year. Since any Year 1 Year 2 Year 3 Year 4 Year 5 Total amount
increase in tuition is integrated into the subsequent tuition, the amount allocated to the fund because 2006-07 2007-08 2008-09 2009-10 2010-11 that should
of the tuition increaseshould be remitted to the fund. The 2001-2006 and 2006-2011 CBAs have be submitted
express provisions on the carry over. The NLRC computed UST’s deficiency14 as follows:
8M + 8M + 8M + 8M + 8M = 40M
For the 1996-2001 CBA:

The NLRC computed UST’s total liability for school years 1996-1997 up to 2010-2011
Year 1 Year 2 Year 3 Year 4 Year 5 Total amount at P80,000,000.00. The records show that UST remitted P8,000,000.00 for 1996-2001 CBA, and there
1996-97 1997-98 1998-99 1999-00 2000-01 that should is absence of proof that the additional contributions to the fund were made for the 2001-2006 and
be submitted 2006-2011 CBAs. The NLRC also ordered UST to pay USTFU attorney’s fees at 10% of the monetary
award.
2M 2M 2M 2M 2M
UST filed a motion for reconsideration of the NLRC decision.1âwphi1 UST again claimed that the
1M 1M 1M 1M Voluntary Arbitrator, and not LA, had jurisdiction over the interpretation of the CBA;
the P80,000,000.00 award had no basis; and the fund should be remitted to the Hospital and Medical
1M 1M 1M
Benefits Committee, not to USTFU, as stated in the CBA.
4M 4M
In a Resolution promulgated on 29 July 2011, the NLRC denied UST’s motion for reconsideration for
2M + 3M + 4M + 8M + 8M = 25M lack of merit.

Since it is undisputed that [UST] remitted the amount of PhP8,000,000.00 only, there is stilla
deficiency of PhP17,000,000.00 corresponding to the 1996-2001 CBA.
xxxx
UST filed a petition for certiorari and prohibition under Rule 65 of the Rules of Court before the CA.
UST still questioned the jurisdiction of the LA, as well as the award of P80,000,000.00. UST also
claimed that USTFU’s money claims are barred byprescription, and that the proper recipient of the
award should bethe Hospital and Medical Benefits Committee. Finally, UST also questioned the award
for attorney’s fees.15

For the 2001-2006 CBA: On 8 November 2011, USTFU filed a comment before the CA. USTFU claimed that the NLRC did not
commit grave abuse of discretion in finding that USTFU is entitled to its claims for payment of the

unremitted benefits. USTFU also claimed that certiorari is not a proper remedy for UST because the
NLRC did not commit any grave abuse of discretion.16
The Court of Appeals’ Ruling
The CA, in its decision promulgated on 13 July 2012, disposed of the present case by agreeing with
UST’s argument that the LA and the NLRC did not have jurisdiction to hear and decide the present
case. The CA stated that since USTFU’s ultimateobjective is to clarify the relevant items in the CBA,
then USTFU’s complaint should have been filed with the voluntary arbitrator or panel of voluntary
arbitrators.
The dispositive portion of the CA’s decision reads:
WHEREFORE, finding grave abuse of discretion on the part of public respondent NLRC, the petition
isGRANTED. Without prejudice to the re-filing of private respondent’s complaint with the proper
forum, the assailed NLRC decision dated June 8,2011 and resolution dated July 29, 2011 in NLRC LAC
No. 10-003370-08, as well as the decision dated September 24, 2010 of the Labor Arbiter in NLRC-
NCR Case No. 09-09745-07 are hereby SET ASIDE.SO ORDERED.17
USTFU filed its motion for reconsideration18 before the CA. USTFU maintained that the LA and the
NLRC had jurisdiction over the subject matter of the complaint.
In a resolution19 promulgated on 19 October 2012, the CA denied USTFU’s motion for reconsideration
for lack of merit.
USTFU filed the present petition for review20 before this Court on 7 December 2012.
The Issues
USTFU enumerated the following grounds warranting allowance of its petition:
1. The Honorable Court of Appeals departed from the usual course of judicial proceedings in holding
that the Labor Arbiter and the NLRC have no jurisdiction over the complaint for unfair labor practice
(ULP) filed by USTFU.
2. The Court of Appeals acted in a way not in accord with the applicable decisions of the Supreme
Court in holding that the voluntary arbitrator has jurisdiction over the instant case despite the fact
that Article XIII ("Grievance Machinery") of the CBA is not applicable.
3. The Court of Appeals committed grave abuse of discretion in the appreciation of facts in not finding
that under Art. XXII of the CBA, the Permanent University-Union Committee (PUUC) is the proper
forum to resolve the dispute betweenUST and USTFU. However, Art. XXII does not provide for a
Labor Relation Set VI * CBA Cases* Page 53 of 63
"voluntary arbitration" clause and therefore, USTFU validly filed the complaint for ULP before the
Labor Arbiter.
4. The Honorable Court of Appeals committed grave abuse of discretion in its appreciation of evidence
in not finding that the parties agreed to have the dispute resolved by the labor tribunals and UST had
actively participated in the proceedings before the Labor Arbiter and the NLRC which is tantamount to
a recognitionof the jurisdiction of the said bodies.
5. The Court of Appeals departed from the usual course of proceedings in referring back the case to
voluntary arbitration despite the fact that the parties already fully and exhaustively litigated the case
before the Labor Arbiter and the NLRC which both correctly found in favor of USTFU. Moreover,
referral to voluntary arbitration would result in waste of precious time in relitigating the case all over
again.21
UST, for its part, enumerated the following grounds for opposing USTFU’s petition:
1. The Court of Appeals correctly ruled that it is the Voluntary Arbitrator which has jurisdiction over
the instant case.
2. Assuming arguendo that NLRC has jurisdiction over the instant case, it clearly erred when it made
an award not prayed for in petitioner USTFU’s complaint, in effect mandating double payment.
3. Assuming arguendo that NLRC has jurisdiction over the instant case, it erred in ruling that
respondent UST is still liable to pay the amount of P17,000,000.00 for the period 1996-2001 under
the 1996-2001 CBA considering that:
a. There is no slide-in provision in the 1996-2001 CBA.
b. The amounts allocated for the Hospitalization Fund during SYs 1996-2001 were not
sourced from the 70% share of the teaching and non-teaching personnel in the tuition fee
increases.
4. The complaint for money claims ofpetitioner USTFU arising from the interpretation of the 1996-
2001 CBA isalready barred by prescription.
5. Assuming arguendo that NLRC has jurisdiction over the instant case, it unjustly and erroneously
ordered respondent UST to pay the subject amount to petitioner USTFU and notto the Hospital and
Medical Benefits Committee under the CBA.22
The Court’s Ruling
The petition has no merit. We shall address the issues raised by the parties one by one.
 Labor Relation Set VI * CBA Cases* Page 54 of 63

Jurisdiction over the Present Case
On the issue of jurisdiction, we affirm with modification the ruling of the CA. The Labor Arbiter has no
jurisdiction over the present case; however, despite the lack of jurisdiction, we rule on the issues
presented. We recognize that a remand to the voluntary arbitration stage will give rise to the
possibility that this case will still reach this Court through the parties’ appeals. Furthermore, it does
not serve the cause of justice if we allow this case to go unresolved for aninordinate amount of time.
We quote the pertinent Articles of the Labor Code of the Philippines below:
Art. 217. Jurisdiction of Labor Arbiters and the Commission. – (a) Except as otherwise provided
underthis Code, the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide,
within thirty (30) calendar days after the submission of the case by the parties for decision without
extension, x x x:
1. Unfair labor practices cases;
xxxx
(b) The Commission shall have exclusive appellate jurisdiction over all cases decided by
Labor Arbiters.
(c) Cases arising from the interpretation or implementation of collective bargaining
agreements and those arising from the interpretation or enforcement of company personnel
policies shall be disposed of by the Labor Arbiter by referring the same to the grievance
machinery and voluntary arbitration as may beprovided in said agreements.
Art. 262-A. Procedures. – The Voluntary Arbitrator or panel of Voluntary Arbitrators shall have the
power to hold hearings, receive evidences and take whatever action isnecessary to resolve the issue
or issues subject to the dispute, including efforts to effect a voluntary settlement between the parties.
All parties to the dispute shall be entitled to attend the arbitration proceedings. The attendance of any
third party to the exclusion of any witness from the proceedings shall be determined by the Voluntary
Arbitrator or panel of Voluntary Arbitrators. Hearing may be adjourned for cause or upon agreement
by the parties.
Unless the parties agree otherwise,it shall be mandatory for the Voluntary Arbitrator or panel of
Voluntary Arbitrators to render an award or decision within twenty (20) calendar days from the date
of submission of the dispute to voluntary arbitration.
The award or decision of the Voluntary Arbitrator or panel of Voluntary Arbitrators shall contain the
facts and the law on which it is based. It shall be final and executory after ten (10) calendar days
from receipt of the copy of the award or decision by the parties.
Upon motion of any interested party, the Voluntary Arbitrator or panel of Voluntary Arbitrators or the
Labor Arbiter in the region where the movant resides, in case of the absence or incapacity of the
Voluntary Arbitrator or panel of Voluntary Arbitrators for any reason, may issue a writ of execution
requiring either the sheriff of the Commission or regular courts or any public official whom the parties
may designate in the submission agreement to execute the final decision, order or award.
On the other hand, the pertinent provisions in the 1996-2001 CBA between UST and USTFU provide:

Art. 261. Jurisdiction of Voluntary Arbitrators or Panel of Voluntary Arbitrators. – The Voluntary ARTICLE X
Arbitrator or panel of Voluntary Arbitrators shall have original and exclusive jurisdiction to hear and GRIEVANCE MACHINERY
decide all unresolved grievances arising from the interpretation or implementation of the Collective
Bargaining Agreement and those arising from the interpretation or enforcement of company personnel
Section 1. Grievance.– Any misunderstanding concerning policies and practices directly affecting
policies referred to in the immediately preceding article. Accordingly, violations of a Collective
faculty members covered by this [collective bargaining] agreement ortheir working conditions in the
Bargaining Agreement, except those which are gross in character, shall no longer be treated as unfair
UNIVERSITY or any dispute arising as to the meaning, application or violation of any provisions of
labor practice and shall be resolved as grievances under the Collective Bargaining Agreement. For
thisAgreement or any complaint that a covered faculty member may haveagainst the UNIVERSITY
purposes of this article, gross violations of Collective Bargaining Agreement shall mean flagrant
shall be considered a grievance.
and/ormalicious refusal to comply with the economic provisions of such agreement.

Section 2. Exclusion. – Termination of employment and preventive suspension shall be exempted

The Commission, its Regional Offices and the Regional Directors of the Department of Labor and
from the provisions of this Article as the same shall be governed by the procedure in the Labor Code
Employment shall not entertain disputes, grievances or matters under the exclusive and original
and its Implementing Rules.
jurisdiction of the Voluntary Arbitrator or panel ofVoluntary Arbitrators and shall immediately dispose
and refer the same to the Grievance Machinery or Voluntary Arbitration provided in the Collective
Bargaining Agreement. Section 3. Procedure. – A grievance shall be settled as expeditiously as possible in accordance with
the following procedure:
Art. 262. Jurisdiction over other labor disputes. – The Voluntary Arbitrator or panel of Voluntary
Arbitrators, upon agreement of the parties, shall also hear and decide all other labor disputes STEP I. Upon presentation of a grievance in writing by the aggrieved faculty member, to the FACULTY
including unfair labor practices and bargaining deadlocks. UNION Grievance Officer, the said officer shall present the same to the Dean or school/department

head concerned who shall render his decision on the matter within five (5) school days from the date
of the presentation. If the aggrieved party is not satisfied with the decision, or if the Dean or
school/department head fails toact within the five-schoolday period, appeal may be made to Step II
within five (5) school days from receipt of the decision or, in the absence of a decision, the expiration
ofthe period for its rendition. If no appeal is made within the period of appeal, the grievance shall be
deemed settled on the basis of Step I.
STEP II. All appeals from StepI shall be presented to and considered by an Adjudication Committee
which shall be composed of two (2) representatives chosen by the UNIVERSITY and two (2)
representatives chosen by the FACULTY UNION. The Committee shall meet within ten (10) school
days after the elevation to this step and and try to settle the grievance to the satisfaction of all
concerned. It shall render its decision within twenty (20) school days following the presentation of the
grievance to the Adjudication Committee. A quorum for any meeting of the Committee shall consist of
a majority of its entire membership. The affirmative vote of at least three (3) members of the
Committee shall be necessary to reach a decision. If the Committee renders a decision, the grievance
shall be deemed settled accordingly. If the Committee fails to make a decision within the period of
twenty (20) days above stated, the FACULTY UNION President may, within ten (10)days thereafter
elevate the grievance to Step III.
STEP III. The grievance appealed to this step shall be handled by the FACULTY UNION President who
shall take it up with the Rector of the UNIVERSITY who, in turn, shall settle the grievance within ten
(10) days. If no settlement is arrived at within the aforementioned period, the grievance will
automatically be referred to voluntary arbitration.
STEP IV. The mechanics of arbitration shall be as follows:
(a) The UNIVERSITY and the FACULTY UNION shall select within three (3) days, by
raffle or process of elimination, an arbitrator mutually agreeable to them preferably
from the list provided by the Bureau of Labor Relations.
(b) The voluntary arbitrator shall render an award within ten (10) days after the
issue in dispute is submitted for decision and his award shall be final and binding
upon all parties to the grievance. (c) Arbitration costs shall be shared equally by the
UNIVERSITY and the FACULTY UNION.23
ARTICLE XXII
PERMANENT UNIVERSITY-UNION COMMITTEE (PUUC)
Permanent UNION-UNIVERSITY Committee (PUUC). – The UNIVERSITY and the FACULTY UNION
realize that notwithstanding this CBA, there will remain problems and irritants which will require the
continuing attention of both parties. Symbolic of the mutual good faith of the parties, they have
agreed to establish a permanent committee, where the UNIVERSITY and the FACULTY UNION are
equally represented, to address these problems as they arise.
Labor Relation Set VI * CBA Cases* Page 55 of 63
a. Within thirty (30) days from signing of this Agreement, the Committee shall meet. The
members of the Committee are the following:
1) For the ADMINISTRATION:
a) Rector or his representative;
b) Vice Rector for Academic Affairs or his representative;
c) Vice Rector for Finance or his representative; and d) Appointee of the
Rector.
2) For the FACULTY UNION:
a) President of the UNION;
b) Executive Vice President of the UNION or his representative;
c) Secretary General orhis representative; and
d) Appointee of the UNION President.
b. The regular meetings of this Committee shall be held at least bimonthly or as the need
arises. c. The decision reached in the PUUCMeetings shall be binding to all UNIVERSITY
functionaries.24
Jurisdiction is determined by the allegations of the complaint. In the present case, USTFU alleged that
UST committed unfair labor practice in its blatant violation of the economic provisions of the 1996-
2001 CBA, and subsequently, the 2001-2006 and 2006-2011 CBAs. UST, meanwhile, has consistently
questioned USTFU’s act of bringing the case before the LA, and of not submitting the present case to
voluntary arbitration. The LA assumed jurisdiction, but ruled that UST did not commit any unfair labor
practice in UST’s interpretation of the economic provisions of the 1996-2001 CBA. The NLRC, on the
other hand, ruled that there was indeed unfair labor practice. The CA ruled that the LA and the NLRC
did not have jurisdiction as there was no unfair labor practice. Reading the pertinent portions of the
1996-2001 CBA along with those of the Labor Code, we see that UST and USTFU’s misunderstanding
arose solely from their differing interpretations of the CBA’s provisions on economic benefits,
specifically those concerning the fund. Therefore, it was clearly error for the LA to assume jurisdiction
over the present case. The case should have been resolved through the voluntary arbitrator or panel
of voluntary arbitrators.
Article 217(c) of the Labor Code provides that the Labor Arbiter shall refer to the grievance machinery
and voluntary arbitration as provided in the CBA those cases that involve the interpretation of said
agreements. Article 261 of the Labor Code further provides that all unresolved grievances arising from
the interpretation or implementation of the CBA, including violations of said agreement, are under the
original and exclusive jurisdiction of the voluntary arbitrator or panel of voluntary arbitrators.
Excluded from this original and exclusive jurisdiction is gross violation of the CBA, which is defined in
Article 261 as "flagrant and/or malicious refusal to comply with the economic provisions" of the CBA.
San Jose v. NLRC25 provides guidelines for understanding Articles 217, 261, and 262:
1. The jurisdiction of the Labor Arbiter and Voluntary Arbitrator or Panel of Voluntary
Arbitrators over the cases enumerated in Articles 217, 261, and 262 can possibly include
money claims in one form or another.

2. The cases where the Labor Arbiters have original and exclusive jurisdiction are enumerated in
Article 217, and that of the Voluntary Arbitrator or Panel of Voluntary Arbitrators in Article 261.
3. The original and exclusive jurisdiction of Labor Arbiters is qualified by an exception as indicated in
the introductory sentence of Article 217 (a), to wit:
"Art. 217. Jurisdiction of Labor Arbiters ... (a) Except as otherwise provided under this Code
the Labor Arbiter shall have original and exclusive jurisdiction to hear and decide ... the
following cases involving all workers..."
The phrase "Except as otherwise provided under this Code" refers to the following
exceptions:
A. Art. 217. Jurisdiction of Labor Arbiters...
xxx
(c) Cases arising from the interpretation or implementation of collective bargaining agreement and
those arising from the interpretation or enforcement of company procedure/policies shall be disposed
of by the Labor Arbiter by referring the same to the grievance machinery and voluntary arbitrator as
may be provided in said agreement.
B. Art. 262. Jurisdiction over other labor disputes. – The Voluntary Arbitrator or panel of Voluntary
Arbitrators, upon agreement of the parties, shall also hear and decide all other labor disputes
including unfair labor practices and bargaining deadlocks.
Parenthetically, the original and exclusive jurisdiction of the Labor Arbiter under Article 217 (c), for
money claims is limited only to those arising from statutes or contracts other than a Collective
Bargaining Agreement. The Voluntary Arbitrator or Panel of Voluntary Arbitrators will have original
and exclusive jurisdiction over money claims "arising from the interpretation or implementation of the
Collective Bargaining Agreement and, those arising fromthe interpretation or enforcement of company
personnel policies," under Article 261.
4. The jurisdiction of Voluntary Arbitrator or Panel of Voluntary Arbitrators is provided for in Arts. 261
and 262 of the Labor Code as indicated above.
1. A close reading of Article 261 indicates that the original and exclusive jurisdiction of
Voluntary Arbitrator or Panel of Voluntary Arbitrators is limited only to:
"... unresolved grievances arising from the interpretation or implementation of the Collective
Bargaining Agreement and those arising from the interpretation or enforcement of company
personnel policies... Accordingly, violations of a collective bargaining agreement, except
those which are gross in character, shall no longer be treated as unfair labor practice and
shall be resolved asgrievances under the Collective Bargaining Agreement. x x x."
Labor Relation Set VI * CBA Cases* Page 56 of 63
2. Voluntary Arbitrators or Panel of Voluntary Arbitrators, however, can exercise jurisdiction
over any and all disputes between an employer and a union and/or individual worker as
provided for in Article 262.
"Art. 262. Jurisdiction over other labor disputes. - The voluntary arbitrator or panel of
voluntary arbitrators, upon agreement of the parties, shall also hear and decide all other
labor disputes including unfair labor practices and bargaining deadlocks."
It must be emphasized that the jurisdiction of the Voluntary Arbitrator or Panel of Voluntary
Arbitrators under Article 262 must be voluntarily conferred upon by bothlabor and management. The
labor disputes referred to in the same Article 262 can include all those disputes mentioned in Article
217 over which the Labor Arbiter has original and exclusive jurisdiction.
As shown in the above contextual and wholistic analysis of Articles 217, 261, and 262 of the Labor
Code, the National Labor Relations Commission correctly ruled that the Labor Arbiter had no
jurisdiction to hear and decide petitioner’s money-claim underpayment of retirement benefits, as the
controversy between the parties involved an issue "arising from the interpretationor implementation"
of a provision of the collective bargaining agreement. The Voluntary Arbitrator or Panel of Voluntary
Arbitrators has original and exclusive jurisdiction over the controversy under Article 261 of the Labor
Code, and not the Labor Arbiter.
Despite the allegation that UST refused to comply with the economic provisions of the 1996-2001
CBA, we cannot characterize UST’s refusal as "flagrant and/or malicious." Indeed, UST’s literal
interpretation of the CBA was, in fact, what led USTFU to fileits complaint. To our mind, USTFU
actually went beyond the text of the 1996-2001 CBA when it claimed that the integrated tuition fee
increase as described in Section 1D(2) is the basis for UST’s alleged deficiency.
We cannot subscribe to USTFU’s view that the 1996-2001 CBA’s Article X: Grievance Machinery is not
applicable to the present case. When the issue is about the grievance procedure, USTFU insists on a
literal interpretation of the 1996-2001 CBA. Indeed, the present case falls under Section 1’s definition
of grievance:"[a]ny misunderstanding concerning policies and practices directly affecting faculty
members covered by this [collective bargaining] agreement ortheir working conditions in the
UNIVERSITY or any dispute arising as to the meaning, application or violation of any provisions of this
Agreement or any complaint that a covered faculty member may have against the UNIVERSITY."
Section 2 excludes only termination and preventive suspension from the grievance procedure.
USTFU’s focus is on the 1996-2001 CBA’s provisions about the grievance process rather than the
provision about the subject matters covered by the grievance process. Despite UST’s alleged violation
of the economic provisions of the CBA by its insufficient remittances to the fund, a dispute arising as
to the meaning, application or violation of the CBA, USTFU used Step I in Section 3, and ignored
Steps III and IV, to rule out any referral to voluntary arbitration. USTFU concludes that the 1996-
2001 CBA’s provisions on grievance machinery only refer to a grievance of a faculty member against
UST, and that said provisions do not contemplate a situation where USTFU itself has a grievance
against UST.
 Labor Relation Set VI * CBA Cases* Page 57 of 63

USTFU argues that the PUUC is the proper forum to resolve the issue, and that the filing of a
complaint beforethe LA is proper inthe absence of a voluntary arbitration clause in the 1996-2001
CBA’s Article XXII: Permanent University-Union Committee. However, as provided in the 1996-2001
CBA, PUUC is established for "continuing problems and irritants which will require the continuing
attention" of UST and USTFU. Clearly, the PUUC addresses mattersnot covered by the CBA.
USTFU’s adamant refusal to considervoluntary arbitration ignores Articles 261 to 262-A of the Labor
Code, as well as Steps III and IV of Section 3 of the 1996-2001 CBA.
USTFU had one year for every alleged breach by UST: school year (SY) 1997-1998, SY 1998-1999, SY
1999-2000, SY 2000-2001, SY 2001-2002, and SY 2002-2003. USTFU did not file any complaint
within the respective one-year prescriptive periods. USTFU decided to file its complaint only in 2007,
several years after the accrual of its several possible causes of action. Even if USTFU filed its
complaint under the theory of money claims from employer-employee relations, its cause of action
still has prescribed.
Determination of the Benefits Due

Accrual of Cause of Action and We consolidate USTFU’s claims, UST’s remittances, and UST’s alleged balances in the table below:
Prescription of Claims

UST’s alleged
USTFU’s claims arose from UST’s alleged failure to contribute the correct amounts to the fund during USTFU’s claims28 UST’s remittances29
Balances
the 1996-2001 CBA. However, USTFU did not complain of any violation by UST during the lifetime of
the 1996-2001 CBA. Neither did USTFU complain of any violation by UST during the lifetime of the
1996 to 2001 CBA
succeeding 2001-2006 CBA. It was only on 6 February 2007 that USTFU sent a demand letter to UST
Rector Fr. Ernesto M. Arceo, O.P., for the claimed hospitalization and medical benefits under the SY 1996-1997 P2,000,000.00 P2,000,000.00 0
1996-2001 CBA. On 2 March 2007, UST, through its Rector, Fr. Ernesto M. Arceo, O.P., informed
USTFU, through its President, Dr. Gil Gamilla, that "the hospitalization and medical benefits contained SY 1997-1998 P3,000,000.00 P1,000,000.00 P2,000,000.00
in [the 1996-2001 CBA] were a one-time give, and therefore not meant to slide." USTFU notified UST
on 24 June 2007 about its intent to file the necessary complaint. On 6 September 2007, USTFU filed a SY 1998-199 P4,000,000.00 P1,000,000.00 P3,000,000.00
complaint against UST before the LA.
1999 Memorandum
The 1996-2001 CBA, as well as the applicable laws, is silent as to when UST’s alleged violation of Agreement
becomes actionable. Thus, we apply Article 1150 of the Civil Code of the Philippines: "The time for
prescription for all kinds of actions, when there is no special provision which ordains otherwise, shall SY 1999-2000 P8,000,000.00 P4,000,000.00 P4,000,000.00
be counted from the day they may be brought."26 Prescription of an action is counted from the time
the action may be brought.27 SY 2000-2001 P8,000,000.00 - P8,000,000.00

2001 to 2006 CBA

It is error to state that USTFU’s cause of action accrued only upon UST’s categorical denial of its
claims on 2 March 2007. USTFU’s cause of action accrued when UST allegedly failed to comply with SY 2001-2002 P8,000,000.00 P2,000,000.00 P6,000,000.00
the economic provisions of the 1996-2001 CBA. Upon such failure by UST, USTFU could have brought
an action against UST. SY 2002-2003 P8,000,000.00 P5,000,000.00 P3,000,000.00

SY 2003-2004 P8,000,000.00 P8,000,000.00 0

Article 290 of the Labor Code provides that unfair labor practices prescribe within one year "from
accrual of such unfair labor practice; otherwise, they shall be forever barred." Article 291 of the same SY 2004-2005 P8,000,000.00 P8,000,000.00 0
Code provides that money claims arising from employer-employee relations prescribe "within three
(3) years from the time the cause of action accrued; otherwise they shall be forever barred." USTFU’s SY 2005-2006 P8,000,000.00 P8,000,000.00 0
claims under the 1996-2001 CBA, whether characterized as one for unfair labor practice or for money
claims from employer-employee relations, have already prescribed when USTFU filed a complaint 2006-2011 CBA
before the LA.
SY 2006-2007 P8,000,000.00 P8,000,000.00 0
USTFU filed its complaint under the theory of unfairlabor practice. Thus, USTFU had one year from
UST’s alleged failure to contribute, or "slide in," the correct amount to the fund to file its complaint. SY 2007-2008 P8,000,000.00 P8,000,000.00 0

SY 2008-2009 P8,000,000.00 P8,000,000.00
SY 2009-2010 P8,000,000.00 P8,000,000.00
SY 2010-2011 P8,000,000.00 P8,000,000.00
Total P105,000,000.00 P79,000,000.00 P26,000,000.00
We restate the following provisions inthe pertinent CBAs to establish what USTFU claims as its bases
for additional funds:
1996-2001 CBA
ARTICLE XIII
ECONOMIC BENEFITS
Section 1. ECONOMIC BENEFIT- Upon ratification and approval and for the term of this Agreement.
the economic benefitsto be granted by the UNIVERSITY and the schedule ofsuch releases are as
follows:
A. School Year 1996-97 (June 1, 1996 to May 31, 1997):
xxxx
4. Hospitalization Fund: Upon ratification and approval hereof, the UNIVERSITY shall
establish a perpetual hospitalization and medical benefits fund in the sum of TWO MILLION
PESOS (P2,000,000) to be managed conjointly by a hospitalization and medical benefits
committee where both management and union are equally represented.
The joint committee shall promulgate its internal rules and regulations, and on the second
year of this agreement, i.e., SY 1997-98, may allocate such amount as required, but not to
exceed ten per cent (10%) of the gross income of the fund,for administrative expenses. For
the duration of the first year of operation of the fund, the UNIVERSITY and the FACULTY
UNION shall equally subsidize the operations of the fund.
The hospitalization costs and medical benefits of the members of the faculty as provided in
Article XVIof this agreement shall be taken from this fund.
This fund is independently managed by the aforementioned joint committee, subject to
independent audit. The yearly state of finances of the fund shall be reported, appended to
the FACULTY UNION’s own annual report, to all members of the university faculty.
B. School Year 1997-98 (June 1, 1997-May 31, 1998):
Labor Relation Set VI * CBA Cases* Page 58 of 63
xxxx
0
2. Hospitalization Fund: The UNIVERSITY shall contribute the sum of ONE MILLION PESOS
0
(P1,000,000) to augment the Hospitalization and Medical Benefits fund.The said sum shall be
0 added to the remaining balance of the aforementioned fund;
xxxx
C. School Year 1998-99 (June 1, 1998-May 31, 1999):
xxxx
2. Hospitalization Fund: The UNIVERSITY shall contribute the sum of ONE MILLION PESOS
(P1,000,000) to augment the Hospitalization and Medical Benefits fund.The said sum shall be
added to the remaining balance of the aforementioned fund;
D. Miscellaneous Provisions:
1. At the end of this agreement, and within three months therefrom, the UNIVERSITY shall
render an accounting of the monies it paid or released to the covered faculty in consequence
thereof;
2. All the economic benefits herein given and those elsewhere provided under this
agreement, other than retirement benefits and one-half of the signing bonus, are chargeable
to the tuition fee share, if any, of the faculty members;
3. In the event that the tuition fee benefits of the faculty for any of the three years covered
by this part of this agreement i.e., the University decides to raise tuition fees in the coming
two school years, exceed those provided herein, the same may be allocated for salaries and
other benefits as determined by the FACULTY UNION and the matter duly communicated to
the UNIVERSITY; and,
4. None of the benefits provided herein, both distributable immediately after ratification and
those to be given during the term hereof, other than the amounts checked-off and the
Hospitalization and Medical Benefits are to be directly distributed to the faculty members by
the University.30 1999 Memorandum of Agreement
1.0 The University hereby agrees to grant increase in salary and fringe benefits as
provided for by the tuition fee increase of school year 1999-2000 according to the
following scheme:
xxxx
6.0 If there is any tuition fee increase for school year 2000-2001, there will
be an additional increase in salary/fringe benefitsto be agreed upon by
both parties.
7.0An additional amount of four million pesos will be deposited in the
hospitalization fund of the faculty.31

2001-2006 CBA
Article XX
HOSPITALIZATION AND MEDICAL BENEFITS
Section 1. Hospitalization and Medical Benefits Fund. – The UNION and the UNIVERSITY shall buildup
and maintain the perpetual Hospitalization and Medical Benefits Fund. For this purpose, the
UNIVERSITY agrees to appropriate for AY 2001-2002 two million pesos (PhP2,000,000.00); for AY
2002-2003 three million pesos (PhP3,000,000.00); and for AY 2003-2004 another three million pesos
(PhP3,000,000.00). It is understood that the amount appropriated for each year is carried over to the
succeeding years and is chargeable to the tuition fee increment. x x x 32 2006-2011 CBA
Article XX
HOSPITALIZATION AND MEDICAL BENEFITS
Section 5. Miscellaneous Provisions. a. The UNIVERSITY will continue to slide in the amounts set aside
in the 2001-2006 CBA to augment the fund. Fifty percent of the amount due shall be remitted within
a month from the start of the first semester and the other fifty percent within a month from the start
of the second semester of the academic year. These sums of money shall be remitted without
necessity of demand on the part of the union and may not be garnished or held by the university on
account of disputesin hospital billings between the University and the Union.
x x x x33
USTFU claims that UST’s contributions should have been cumulative, with the amount appropriated
for each year carried over to the succeeding years and is chargeable to the tuitionfee increment.
However, USTFU’s claims are not supported by the economic provisions of the 1996-2001 CBA and
the 1999 Memorandum of Agreement reproduced above.
We wholly agree with UST’s interpretation of the economic provisions of the 1996-2001 CBA, the
1999 Memorandumof Agreement, and the 2001-2006 and 2006-2011 CBAs, as well as its remittances
to the fund for the covered periods. UST faithfully followed the clear provisions of these agreements.
The 1996-2001 CBA established the fund, with an initial remittance of P2, 000, 000. 00 for school
year 1996-1997. UST bound itself to augment the fund by contributing P1,000,000.00 per year for
school years 1997-1998 and 1998-1999. The 1999 Memorandum of Agreement merely stated that
UST will deposit P4,000,000.00 to the fund. Express mention of the carryover is found onlv in Section
1, Article XX of the 2001-2006 CBA: "It is understood that the amount appropriated for each year is
carried over to the succeeding years xx x." The 1996-2001 CBA does not have this carry-over
provision. During the lifetime of the 1996-2001 CBA, the 1999 Memorandum of Agreement, and the
2001-2006 CBA, USTFU never questioned the non-compliance by UST with an alleged carry-over
agreement applicable to the 1996-2001 CBA. This Court is well aware of Article 1702 of the Civil
Code, which provides that "[i]n case of doubt, all labor legislation and all labor contracts shall be
construed in favor of the safety and decent living for the laborer." This Court is also well aware that
Labor Relation Set VI * CBA Cases* Page 59 of 63
when the provisions of the CBA are clear and unambiguous, the literal meaning of the stipulations
shall govern.34 In the present case, the CBA provisions pertaining to the fund are clear and should be
interpreted according to their literal meaning.
WHEREFORE, we DENY the petition. We DECLARE that the claims of the University of Santo Tomas
Faculty Union have prescribed and that there is no carry-over provision for the Hospitalization and
Medical Benefits Fund in the 1996-2001 Collective Bargaining Agreement and in the 1999
Memorandum of Agreement. The carry-over provision for the Hospitalization and Medical Benefits
Fund is found only in the 2001-2006 and 2006-2011 Collective Bargaining Agreements.No costs.SO
ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 192601 June 3, 2013
PHILIPPINE JOURNALISTS, INC., Petitioner,
vs.
JOURNAL EMPLOYEES UNION (JEU), FOR ITS UNION MEMBER, MICHAEL
ALFANTE, Respondents.
DECISION
BERSAMIN, J.:
The coverage of the term legal dependent as used in a stipulation in a collective bargaining
agreement (CBA) granting funeral or bereavement benefit to a regular employee for the death of a
legal dependent, if the CBA is silent about it, is to be construed as similar to the meaning that
contemporaneous social legislations have set. This is because the terms of such social legislations are
deemed incorporated in or adopted by the CBA.
The decision of the Court of Appeals (CA) under review summarizes the factual and procedural
antecedents, as follows:
Complainant Judith Pulido alleged that she was hired by respondent as proofreader on 10 January
1991; that she was receiving a monthly basic salary of P-15,493.66 plus P-155.00 longevity pay plus
other benefits provided by law and their Collective Bargaining Agreement; that on 21 February 2003,
as union president, she sent two letters to President Gloria Arroyo, regarding their complaint of
mismanagement being committed by PIJ executive; that sometime in May 2003, the union was
furnished with a letter by Secretary Silvestre Afable, Jr. head of Presidential Management Staff (PMS),
endorsing their letter-complaint to Ombudsman Simeon V. Marcelo; that respondents took offense
and started harassments to complainant union president; that on 30 May 2003, complainant received
a letter from respondent Fundador Soriano, International Edition managing editor, regarding
complainant’s attendance record; that complainant submitted her reply to said memo on 02 June
2003; that on 06 June 2003, complainant received a memorandum of reprimand; that on 04 July
2003, complainant received another memo from Mr. Soriano, for not wearing her company ID, which
she replied the next day 05 July 2003; that on 04 August 2003, complainant again received a memo
regarding complainant’s tardiness; that on 05 August 2003, complainant received another

memorandum asking her to explain why she should not be accused of fraud, which she replied to on
07 August 2003; and that on the same day between 3:00 to 4:00 P.M., Mr. Ernesto "Estong" San
Agustin, a staff of HRD handed her termination paper.
Complainant added that in her thirteen (13) years with the company and after so many changes in its
management and executives, she had never done anything that will cause them to issue a
memorandum against her or her work attitude, more so, reasons to terminate her services; that she
got dismissed because she was the Union President who was very active in defending and pursuing
the rights of her union members, and in fighting against the abuses of respondent Corporate Officers;
and that she got the ire of respondents when the employees filed a complaint against the Corporate
Officers before Malacañang and which was later indorsed to the Office of the Ombudsman.
The second complainant Michael L. Alfante alleged that he started to work with respondents as
computer technician at Management Information System under manager Neri Torrecampo on 16 May
2000; that on 15 July 2001, he was regularized receiving a monthly salary of P9,070.00 plus other
monetary benefits; that sometime in 2001, Rico Pagkalinawan replaced Torrecampo, which was
opposed by complainant and three other co-employees; that Pagkalinawan took offense of their
objection; that on 22 October 2002, complainant Alfante received a memorandum from Pagkalinawan
regarding his excessive tardiness; that on 10 June 2003, complainant Alfante received a
memorandum from Executive Vice-President Arnold Banares, requiring him to explain his side on the
evaluation of his performance submitted by manager Pagkalinawan; that one week after complainant
submitted his explanation, he was handed his notice of dismissal on the ground of "poor
performance"; and that complainant was dismissed effective 28 July 2003.
Complainant Alfante submitted that he was dismissed without just cause.
Respondents, in their position paper, averred that complainants Pulido and Alfante were dismissed for
cause and with due process.
With regard to complainant Pulido, respondents averred that in a memorandum dated 30 May 2003,
directed complainant to explain her habitual tardiness, at least 75 times from January to May of 2003.
In a memorandum, dated 06 June 2003, directed complainant to observe the 3 p.m. rule to avoid
grammatical lapses, use of stale stories just to beat the 10:00 p.m. deadline. In the same
memorandum complainant was given the warning that any repeated violation of the rules shall be
dealt with more severely. Once again, in a memorandum, dated 04 August 2003, complainant Pulido
was required to explain why no disciplinary action should be taken against her for habitual tardiness –
18 times out of the 23 reporting days during the period from 27 June – 27 July 2003 and on 05
August 2003, complainant was directed to explain in writing why complainant should not be
administratively sanctioned for committing fraud or attempting to commit fraud against respondents.
Respondents found complainant’s explanations unsatisfactory. On 07 August 2003, respondents
dismissed complainant Pulido for habitual tardiness, gross insubordination, utter disrespect for
superiors, and committing fraud or attempting to commit fraud which led to the respondents’ loss of
confidence upon complainant Pulido.
Labor Relation Set VI * CBA Cases* Page 60 of 63
In case of complainant Alfante, respondents averred in defense that complainant was dismissed for
"poor performance" after an evaluation by his superior, and after being forewarned that complainant
may be removed if there was no showing of improvement in his skills and knowledge on current
technology.
In both instances, respondents maintained that they did not commit any act of unfair labor practices;
that they did not commit acts tantamount to interfering, restraining, or coercing employees in the
exercise of their right to self-organization.
Respondents deny liabilities as far as complainants’ monetary claims are concerned. Concerning
violations of the provision on wage distortion under Wage Order No. 9, respondents stressed that
complainants were not affected since their salary is way over the minimum wage.
With respect to the alleged non-adjustment of longevity pay and burial aid, respondent PJI pointed
out that it complies with the provisions of the CBA and that both complainants have not claimed for
the burial aid.
Respondents put forward the information that the alleged nonpayment of rest days – every Monday
for the past three (3) years is a matter that is still at issue in NLRC Case No. 02-0402973-93, which
case is still pending before this Commission.
Respondents asserted that the respondents Arturo Dela Cruz, Bobby Capco, Arnold Banares, Ruby
Ruiz-Bruno and Fundador Soriano should not be held liable on account of complainants’ dismissal as
they merely acted as agents of respondent PJI.1
Upon the foregoing backdrop, Labor Arbiter Corazon C. Borbolla rendered her decision on March 29,
2006, disposing thusly:
WHEREFORE, foregoing premises considered, judgment is hereby rendered, finding complainant
Judith Pulido to have been illegally dismissed. As such, she is entitled to reinstatement and
backwages from 07 August 2003 up to her actual or payroll reinstatement. To date, complainant’s
backwages is P294,379.54.
Respondent Philippine Journalist, Inc. is hereby ordered to pay complainant Judith Pulido her
backwages from 07 August 2003 up to her actual or payroll reinstatement and to reinstate her to her
former position without loss of seniority right.
Respondent is further ordered to submit a report to this Office on complainant’s reinstatement ten
(10) days from receipt of this decision.
The charge of illegal dismissal by Michael Alfante is hereby dismissed for lack of merit.
The charge of unfair labor practice is dismissed for lack of basis.SO ORDERED.2

Complainant Michael Alfante (Alfante), joined by his labor organization, Journal Employees Union
(JEU), filed a partial appeal in the National Labor Relations Commission (NLRC).3
In the meantime, on May 10, 2006, petitioner and Judith Pulido (Pulido), the other complainant,
jointly manifested to the NLRC that the decision of March 29, 2006 had been fully satisfied as to
Pulido under the following terms, namely: (a) she would be reinstated to her former position as
editorial staffmember, or an equivalent position, without loss of seniority rights, effective May 15,
2006; (b) she would go on maternity leave, and report to work after giving birth; (c) she would be
entitled to backwages of P130,000.00; and (d) she would execute the quitclaim and release on May
11, 2006 in favor of petitioner.4 This left Alfante as the remaining complainant.
On January 31, 2007, the NLRC rendered its decision dismissing the partial appeal for lack of merit.
JEU and Alfante moved for the reconsideration of the decision, but the NLRC denied their motion on
April 24, 2007.
Thereafter, JEU and Alfante assailed the decision of the NLRC before the CA on certiorari (C.A.-G.R.
SP No. 99407).
On February 5, 2010, the CA promulgated its decision in C.A.-G.R. SP No. 99407,7 decreeing:
WHEREFORE, premises considered, the instant petition is PARTLY GRANTED.
The twin Resolutions dated January 31, 2007 and April 24, 2007, respectively, of the Third Division of
the National Labor Relations Commission (NLRC), in NLRC NCR CA No. 048785-06 (NLRC NCR Case
No. 00-10-11413-04), are MODIFIED insofar as the funeral or bereavement aid is concerned, which is
hereby GRANTED, but only after submission of conclusive proofs that the deceased is a parent, either
father or mother, of the employees concerned, as well as the death certificate to establish the fact of
death of the deceased legal dependent.
The rest of the findings of fact and law in the assailed Resolutions are hereby AFFIRMED.SO
ORDERED.
Both parties moved for reconsideration, but the CA denied their respective motions
reconsideration on June 2, 2010.8
JEU and Alfante appealed to the Court (G.R. No. 192478) to challenge the CA’s dispositions regarding
the legality of: (a) Alfante’s dismissal; (b) the non-compliance with Minimum Wage Order No. 9; and
(c) the non-payment of the rest day.9
On August 18, 2010, the Court denied due course to the petition in G.R. No. 192478 for failure of
petitioners to sufficiently show that the CA had committed any reversible error to warrant the Court’s
exercise of its discretionary appellate jurisdiction.10
Labor Relation Set VI * CBA Cases* Page 61 of 63
The Court denied with finality JEU and Alfante’s ensuing motion for reconsideration through the
resolution of December 8, 2010.11 The entry of judgment in G.R. No. 192478 issued in due course on
February 1, 2011.12
On its part, petitioner likewise appealed (G.R. No. 192601), seeking the review of the CA’s disposition
in the decision of February 5, 2010 on the granting of the funeral and bereavement aid stipulated in
the CBA.
In its petition for review, petitioner maintained that under Section 4, Article XIII of the CBA, funeral
and bereavement aid should be granted upon the death of a legal dependent of a regular employee;
that consistent with the definition provided by the Social Security System (SSS), the term legal
dependent referred to the spouse and children of a married regular employee, and to the parents and
siblings, 18 years old and below, of a single regular employee;13 that the CBA considered the term
dependents to have the same meaning as beneficiaries, as provided in Section 5, Article XIII of the
CBA on the payment of death benefits;14 that its earlier granting of claims for funeral and
bereavement aid without regard to the foregoing definition of the legal dependents of married or
single regular employees did not ripen into a company policy whose unilateral withdrawal would
constitute a violation of Article 100 of the Labor Code,15 the law disallowing the non-diminution of
benefits;16 that it had approved only four claims from 1999 to 2003 based on its mistaken
interpretation of the term legal dependents, but later corrected the same in 2000;17 that the grant of
funeral and bereavement aid for the death of an employee’s legal dependent, regardless of the
employee’s civil status, did not occur over a long period of time, was not consistent and deliberate,
and was partly due to its mistake in appreciating a doubtful question of law; and that its denial of
subsequent claims did not amount to a violation of the law against the non-diminution of benefits.18
In their comment,19 JEU and Alfante countered that the CBA was a bilateral contractual agreement
that could not be unilaterally changed by any party during its lifetime; and that the grant of burial
benefits had already become a company practice favorable to the employees, and could not anymore
be reduced, diminished, discontinued or eliminated by petitioner.
Issue
In view of the entry of judgment issued in G.R. No. 192478, JEU and Alfante’s submissions on the
illegality of his dismissal, the non-payment of his rest days, and the violation of Minimum Wage Order
No. 9 shall no longer be considered and passed upon.
for
The sole remaining issue is whether or not petitioner’s denial of respondents’ claims for funeral and
bereavement aid granted under Section 4, Article XIII of their CBA constituted a diminution of
benefits in violation of Article 100 of the Labor Code.
Ruling
The petition for review lacks merit.

The nature and force of a CBA are delineated in Honda Phils., Inc. v. Samahan ng Malayang
Manggagawa sa Honda,20 thuswise:
A collective bargaining agreement (or CBA) refers to the negotiated contract between a legitimate
labor organization and the employer concerning wages, hours of work and all other terms and
conditions of employment in a bargaining unit. As in all contracts, the parties in a CBA may establish
such stipulations, clauses, terms and conditions as they may deem convenient provided these are not
contrary to law, morals, good customs, public order or public policy. Thus, where the CBA is clear and
unambiguous, it becomes the law between the parties and compliance therewith is mandated by the
express policy of the law.
Accordingly, the stipulations, clauses, terms and conditions of the CBA, being the law between the
parties, must be complied with by them. The literal meaning of the stipulations of the CBA, as with
every other contract, control if they are clear and leave no doubt upon the intention of the contracting
parties.22
Here, a conflict has arisen regarding the interpretation of the term legal dependent in connection with
the grant of funeral and bereavement aid to a regular employee under Section 4, Article XIII of the
CBA,23 which stipulates as follows:
SECTION 4. Funeral/Bereavement Aid. The COMPANY agrees to grant a funeral/bereavement aid in
the following instances:
a. Death of a regular employee in line of duty – P50,000
b. Death of a regular employee not in line of duty – P40,000
c. Death of legal dependent of a regular employee – P15,000. (Emphasis supplied)
Petitioner insists that notwithstanding the silence of the CBA, the term legal dependent should follow
the definition of it under Republic Act (R.A.) No. 8282 (Social Security Law),24 so that in the case of a
married regular employee, his or her legal dependents include only his or her spouse and children,
and in the case of a single regular employee, his or her legal dependents include only his or her
parents and siblings, 18 years old and below; and that the term dependents has the same meaning as
beneficiaries as used in Section 5, Article XIII of the CBA.
We cannot agree with petitioner’s insistence.
Social legislations contemporaneous with the execution of the CBA have given a meaning to the term
legal dependent. First of all, Section 8(e) of the Social Security Law provides that a dependent shall
be the following, namely: (a) the legal spouse entitled by law to receive support from the member;
(b) the legitimate, legitimated, or legally adopted, and illegitimate child who is unmarried, not
gainfully employed and has not reached 21 of age, or, if over 21 years of age, is congenitally or while
still a minor has been permanently incapacitated and incapable of self-support, physically or mentally;
and (c) the parent who is receiving regular support from the member. Secondly, Section 4(f) of R.A.
No. 7875, as amended by R.A. No. 9241,25 enumerates who are the legal dependents, to wit: (a) the
Labor Relation Set VI * CBA Cases* Page 62 of 63
legitimate spouse who is not a member; (b) the unmarried and unemployed legitimate, legitimated,
illegitimate, acknowledged children as appearing in the birth certificate; legally adopted or step-
children below 21 years of age; (c) children who are 21 years old and order but suffering from
congenital disability, either physical or mental, or any disability acquired that renders them totally
dependent on the member of our support; and (d) the parents who are 60 years old or older whose
monthly income is below an amount to be determined by the Philippine Health Insurance Corporation
in accordance with the guiding principles set forth in Article I of R.A. No. 7875. And, thirdly, Section
2(f) of Presidential Decree No. 1146, as amended by R.A. No. 8291,dependent for support upon the
member or pensioner; (b) the legitimate, legitimated, legally adopted child, including the illegitimate
child, who is unmarried, not gainfully employed, not over the age of majority, or is over the age of
majority but incapacitated and incapable of self-support due to a mental or physical defect acquired
prior to age of majority; and (c) the parents dependent upon the member for support.1âwphi1
It is clear from these statutory definitions of dependent that the civil status of the employee as either
married or single is not the controlling consideration in order that a person may qualify as the
employee’s legal dependent. What is rather decidedly controlling is the fact that the spouse, child, or
parent is actually dependent for support upon the employee. Indeed, the Court has adopted this
understanding of the term dependent in Social Security System v. De Los Santos,27 viz:
Social Security System v. Aguas is instructive in determining the extent of the required "dependency"
under the SS Law. In Aguas, the Court ruled that although a husband and wife are obliged to support
each other, whether one is actually dependent for support upon the other cannot be presumed from
the fact of marriage alone.
Further, Aguas pointed out that a wife who left her family until her husband died and lived with other
men, was not dependent upon her husband for support, financial or otherwise, during the entire
period.
Said the Court:
In a parallel case involving a claim for benefits under the GSIS law, the Court defined a dependent as
"one who derives his or her main support from another. Meaning, relying on, or subject to, someone
else for support; not able to exist or sustain oneself, or to perform anything without the will, power,
or aid of someone else." It should be noted that the GSIS law likewise defines a dependent spouse as
"the legitimate spouse dependent for support upon the member or pensioner." In that case, the Court
found it obvious that a wife who abandoned the family for more than 17 years until her husband died,
and lived with other men, was not dependent on her husband for support, financial or otherwise,
during that entire period. Hence, the Court denied her claim for death benefits.
The obvious conclusion then is that a wife who is already separated de facto from her husband cannot
be said to be "dependent for support" upon the husband, absent any showing to the contrary.
Conversely, if it is proved that the husband and wife were still living together at the time of his death,
it would be safe to presume that she was dependent on the husband for support, unless it is shown
that she is capable of providing for herself.
 Labor Relation Set VI * CBA Cases* Page 63 of 63

Considering that existing laws always form part of any contract, and are deemed incorporated in each With that, the denial of Alfante's qualified claim for such benefit pursuant to Section 4, Article XIII of
and every contract,28 the definition of legal dependents under the aforecited social legislations applies the CBA violated the law prohibiting the diminution of benefits.
herein in the absence of a contrary or different definition mutually intended and adopted by the
parties in the CBA. Accordingly, the concurrence of a legitimate spouse does not disqualify a child or a
WHEREFORE, the Court AFFIRMS the decision promulgated on February 5, 201 0; and ORDERS
parent of the employee from being a legal dependent provided substantial evidence is adduced to
petitioner to pay the costs of suit.SO ORDERED.
prove the actual dependency of the child or parent on the support of the employee.

In this regard, the differentiation among the legal dependents is significant only in the event the CBA
has prescribed a hierarchy among them for the granting of a benefit; hence, the use of the terms
primary beneficiaries and secondary beneficiaries for that purpose. But considering that Section 4,
Article XIII of the CBA has not included that differentiation, petitioner had no basis to deny the claim
for funeral and bereavement aid of Alfante for the death of his parent whose death and fact of legal
dependency on him could be substantially proved.

Pursuant to Article 100 of the Labor Code, petitioner as the employer could not reduce, diminish,
discontinue or eliminate any benefit and supplement being enjoyed by or granted to its employees.
This prohibition against the diminution of benefits is founded on the constitutional mandate to protect
the rights of workers and to promote their welfare and to afford labor full protection. 29 The application
of the prohibition against the diminution of benefits presupposes that a company practice, policy or
tradition favorable to the employees has been clearly established; and that the payments made by
the employer pursuant to the practice, policy, or tradition have ripened into benefits enjoyed by
them.30 To be considered as a practice, policy or tradition, however, the giving of the benefits should
have been done over a long period of time, and must be shown to have been consistent and
deliberate.31 It is relevant to mention that we have not yet settled on the specific minimum number of
years as the length of time sufficient to ripen the practice, policy or tradition into a benefit that the
employer cannot unilaterally withdraw.32

The argument of petitioner that the grant of the funeral and bereavement benefit was not voluntary
but resulted from its mistaken interpretation as to who was considered a legal dependent of a regular
employee deserves scant consideration. To be sure, no doubtful or difficult question of law was
involved inasmuch as the several cogent statutes existing at the time the CBA was entered into
already defined who were qualified as the legal dependents of another. Moreover, the voluntariness of
the grant of the benefit became even manifest from petitioner’s admission that, despite the
memorandum it issued in 200033 in order to "correct" the interpretation of the term legal dependent,
it still approved in 2003 the claims for funeral and bereavement aid of two employees, namely: (a)
Cecille Bulacan, for the death of her father; and (b) Charito Cartel, for the death of her mother, based
on its supposedly mistaken interpretation.34

It is further worthy to note that petitioner granted claims for funeral and bereavement aid as early as
1999, then issued a memorandum in 2000 to correct its erroneous interpretation of legal dependent
under Section 4, Article XIII of the CBA. This notwithstanding, the 2001-2004 CBA35 still contained
the same provision granting funeral or bereavement aid in case of the death of a legal dependent of a
regular employee without differentiating the legal dependents according to the employee's civil status
as married or single. The continuity in the grant of the funeral and bereavement aid to regular
employees for the death of their legal dependents has undoubtedly ripened into a company policy.